Notting Hill Genesis (NHG) (202234209)

REPORT

COMPLAINT 202234209

Notting Hill Genesis (NHG)

22 April 2024

Our approach

The Housing Ombudsman’s approach to investigating and determining complaints is to decide what is fair in all the circumstances of the case. This is set out in the Housing Act 1996 and the Housing Ombudsman Scheme (the Scheme). The Ombudsman considers the evidence and looks to see if there has been any ‘maladministration’, for example, whether the landlord has failed to keep to the law, followed proper procedure, followed good practice, or behaved in a reasonable and competent manner.

Both the resident and the landlord have submitted information to the Ombudsman, and this has been carefully considered. Their accounts of what has happened are summarised below. This report is not an exhaustive description of all the events that have occurred in relation to this case, but an outline of the key issues as a background to the investigation’s findings.

The complaint

This complaint is about the landlord’s:
1. Response to the resident’s concerns about a service charge refund.
2. Complaint handling.

Background and summary of events

Background

The resident is a shared owner of the property since 2017. The lease began in 2014. The property is a 1 bedroom flat in a block. Though the landlord manages the block, most homes in the wider estate are managed by an external agent appointed by a superior landlord. The landlord has said the agent is responsible for setting many of the resident’s service charge costs.
The landlord issued the resident an end of year service charge statement on 27 September 2022. It related to the financial year 2021-22. Both parties agree the landlord’s documents confirmed the resident was due a refund of £2,113.30 by 1 November 2022. This was based on a matching account surplus.
In an internal email on 5 October 2022, the landlord highlighted that a number of the block’s accounts had higher than expected surplus figures. Its email, to leasehold managers, said the figures should be double-checked. The landlord later told us it withheld refunds from this date so it could investigate the matter.
On the date her refund was due, the resident emailed the landlord to chase the payment. Subsequently, between 7 and 21 November 2022, she emailed the landlord around 6 more times about the unpaid refund. In this period, the landlord replied on 2 occasions. Its emails did not clearly address her concerns.
The resident complained on 25 November 2022. Her email included contact details for other impacted block residents (the resident brought an individual complaint to the Ombudsman). She wanted the landlord to; issue the refund urgently, explain the delay and lack of communication, and detail the measures it would take to improve its performance.
On 29 November 2022 the landlord identified the source of the problem. Its related internal correspondence said there were 2 charge figures in the system for each affected leaseholder. In addition, the landlord had incorrectly used the higher figure even though it did not reflect the amount leaseholders had been charged. As a result, “inflated income figures…resulted in false surpluses…”.
The evidence indicates the landlord updated the resident several days later. The Ombudsman has not seen a copy of its email. We have seen a subsequent update from 12 December 2022, which included an apology and a detailed explanation of the error. Other key points from the landlord’s update were:
1. Repeating the calculation using the correct figure (total service charges paid by the resident) confirmed her account was in deficit by £437.42.
2. The resident was awarded £450 in compensation comprising; £100 each for the error and poor communication, and £250 for any related distress or inconvenience.
3. The compensation exceeded the resident’s account deficit. The landlord would reaudit its accounts and, afterwards, use the compensation to offset the deficit.
4. The above actions were likely to be completed by February 2023. In the meantime, the resident could contact the landlord with any queries.
The resident chased the landlord’s complaint response on 14 December 2022. The landlord issued a stage 1 response the next day. This was around 14 working days after the resident’s complaint. The landlord apologised for the delay. Its correspondence included a copy of its recent update. The landlord’s new points were:
1. There was a delay in logging the resident’s complaint. Feedback had been provided to the relevant member of staff.
2. The landlord should have updated leaseholders when it decided to withhold their surplus refunds and investigate.
3. The landlord felt the surplus error was a one-off issue. However, it would ensure there was thorough communication with residents in future.
The resident replied 5 days later. She thanked the landlord for its offer of a further £50 in complaint handling related compensation. However, she felt her experience confirmed its “entire process was flawed”. In addition, the error should have been identified earlier given the landlord’s final accounts were externally audited. Other key points were;
1. There was now a significant gap in the resident’s financial plans. This could not be offset by the landlord’s approach.
2. The situation had caused the resident financial hardship. As a result, the compensation was disproportionate.
The landlord responded in detail on 22 December 2022. It said it had already provided provisional account figures and submitted an amended income figure for auditing. Further, its external audit process was a high-level check rather than a line by line assessment. It also said it shared details of the error with its service charge staff for learning purposes.
Importantly, the landlord disputed that its September 2022 letters had caused the resident any “financial hardship in and of themselves”. As a result, it said it would not award any additional compensation beyond the £450 previously offered.
In early 2023, the resident disputed the landlord’s recent information. This was on the basis it had also amended a total costs figure resulting in a discrepancy of £1,350. Overall, she said she had lost trust in the landlord. She asked it for a summary of its service charge costs for the relevant financial year, along with supporting receipts. She also asked it to confirm her escalation options.
The landlord replied around 2 weeks later. It said:
1. It would look in to the discrepancy and respond in due course.
2. It was mindful times were tough financially. Its compensation offer was intended to avoid any hardship.
3. It was unable to provide a credit “that did not technically exist” (since the incorrect figure assumed the resident had paid around double the amount of service charges and this was not the case).
4. Stage 2 was available upon confirmation from the resident.
5. The landlord was unable to provide invoices until its accounts were reaudited. When they were reissued, the resident could request invoices for each expense.
The resident escalated her complaint on 20 February 2023. Her escalation email shows that, during the interim period, she had chased the landlord 4 times about the discrepancy.
On 20 March 2023 the landlord responded at stage 2. This was 20 working days after the resident’s formal escalation request. The response reiterated how the resident could check the landlord’s calculation. The resident was awarded a further £125 in compensation based on communication failures. The key points were:
1. The landlord would not pay the incorrect surplus figure (£2,113.30), which was inaccurate. Its offer of £450 in compensation remained open and would be applied when its accounts were reaudited.
2. The resident could request to inspect the landlord’s accounts and invoices under Section 22 of the Landlord and Tenant Act (1985).
3. The landlord’s amended (increased) total costs figure was correct. Its previous figure omitted £1,350 in management fees (£150 per household). The landlord hoped its explanation had clarified the discrepancy.
4. Leaseholders would not be charged in relation to the landlord’s reauditing costs. The resident’s personal contribution towards the original audit was £11.74. The landlord felt its previous compensation offer covered this cost.
5. The landlord’s review confirmed its communication had been poor. It recognised the resident first raised the discrepancy in January 2023. Her escalation should have been prioritised and acknowledged within 48 hours.
6. The landlord’s additional compensation comprised £50 for an initial lack of communication, and £75 for complaint handling delays and failures at stage 2.
7. The resident’s complaint highlighted issues around thoroughness. The landlord recognised it could have done more to minimise the impact of its service charge error. It would seek to improve its performance going forwards.
The landlord supplied its case evidence to the Ombudsman in late 2023. It said it was testing a new method to improve the timeliness and accuracy of its accounting. Further, the new system would help its external auditors make comparisons with previous financial years. It felt this would help to identify any discrepancies earlier.
The resident updated the Ombudsman during a phone call on 12 April 2024. She told us various service charge issues were ongoing. Subsequently, she sent us an email with several attachments. In summary, her new information showed:
1. The resident was concerned she had been double-charged for some expenses based on information the landlord provided in August 2023.
2. In October 2023, the landlord accepted the resident had highlighted a different calculation error (from the information seen, it was unclear which financial year the error related to).
3. The resident had various concerns about the landlord’s administration of service charges for the financial years: 2022-23, 2023-24, and 2024-25.
4. In February 2024, the landlord responded to a number of the resident’s new concerns at stage 1.
5. Among other issues, the resident had broad concerns about the landlord’s: competence, adherence to policies, communication, and service charge information.

Assessment and findings

Policies and procedures

The landlord operates a 2 stage complaints procedure. Its relevant policy, effective August 2022, shows it aims to respond to complaints within 10 working days at stage 1. At stage 2, it aims to respond within 20 working days.
As part of our assessment the Ombudsman also reviewed: the service charge clauses in the resident’s lease agreement, the landlord’s relevant service charge policy, the service charge section in its leaseholder guide, and sections 21 and 22 of the Landlord and Tenant Act (1985).

The landlord’s response to the resident’s concerns about a service charge refund

It is recognised the situation is frustrating and disappointing for the resident. She feels the landlord did not do enough to put things right given the distress and inconvenience she was caused by its errors. We considered whether the landlord’s overall redress was in line with the Ombudsman’s Dispute Resolution Principles: Be Fair, Put Things Right, and Learn from Outcomes.
Based on the wording of its complaint responses, the landlord awarded the resident £500 in related compensation (£450 at stage 1 and £50 at stage 2). Having considered its rationale and the case evidence, the landlord’s calculations were reasonable given the failures it identified. Importantly, no information was seen to show it was obliged to honour the surplus figure it issued in error.
The information seen shows the landlord ensured the resident was not left out of pocket due to the above failure. It did this by awarding proportionate compensation to address her related distress and inconvenience. Its award was broadly consistent with the Ombudsman’s expectations. The landlord was not obliged to pay the resident’s account shortfall. In other words, it did not have to cover the deficit and award additional compensation.
Since we were satisfied with the landlord’s approach to the errors it identified, we considered whether it unfairly overlooked any additional failures. On 22 December 2022 the landlord told the resident the “only change” it had made to its accounts was an amendment to the income figure. Subsequently, with reference to its letter on 12 December 2022, the resident disputed this assertion.
In its stage 2 response, the landlord acknowledged the discrepancy. It explained its previous information did not reflect a total of £1,350 in management fees. It also explained its calculation. However, it failed to acknowledge the resident had highlighted a further accounting error. Nor did it acknowledge the incorrect information it had given on 22 December 2022.
Given the circumstances, the landlord should have redressed the resident for any further distress or inconvenience caused by its additional errors (not just the delays in responding to her discrepancy query). As a result, there was maladministration in respect of this complaint point. The timeline shows the resident spent time engaging with the landlord about the matter. It is reasonable to conclude this could have been avoided.
It is important to recognise things the landlord did well. In particular, it was noted the landlord was able to identify and address key failures, such as the failure to update affected leaseholders in October 2022, without the Ombudsman’s intervention. It was also noted the landlord’s update in late 2023 suggests it was still mindful of the issues highlighted by this case. This showed a commitment to the principle of Learn from Outcomes.
Overall, there was maladministration in respect of this complaint point. The landlord failed to recognise, and therefore redress, the resident for an additional accounting failure that she highlighted. It also failed to recognise she was given incorrect information. This was unfair and inappropriate. The Ombudsman will order increased compensation to put things right based on the information seen.

The landlord’s complaint handling

Officially, the landlord awarded the resident a total of £75 for complaint handling delays and failures. The wording of its stage 2 response shows this was based on delays and failures that occurred after its stage 1 response. This award was reasonable given what went wrong. However, the timeline shows the landlord overlooked several issues that occurred beforehand.
For example, it confirms the landlord’s stage 1 response was delayed by 4 working days and the resident was prompted to chase the response. It is reasonable to conclude this was both unnecessary and inconvenient. No information was seen to suggest she was alerted to a delay at this point. As a result, the landlord’s informal offer of £50 in compensation was reasonable.
This offer was evident from the resident’s email on 20 December 2022. However, no information was seen to show the landlord paid this amount accordingly. In addition, its subsequent correspondence (issued by the same operative 2 days later) arguably contained conflicting information.
This was because the landlord said it would not award additional compensation above £450. Its correspondence did not reference the £50 that was previously agreed separately. It is reasonable to conclude this was likely confusing for the resident. In any case, the landlord should have reasonably resolved the situation at stage 2.
The landlord should have identified the informal offer and followed up accordingly, or identified the stage 1 issues and addressed them anyway. From the information seen, the delays and failures at stage 1 remain unaddressed.
This was unfair and inappropriate. Given the circumstances, there was maladministration in respect of this complaint point. To avoid similar issues going forwards, the landlord should consider its own complaint handling from the beginning to the end of the complaint journey. This should be done at each complaint stage but it is especially important at stage 2.
The resident’s other service charge concerns were noted. However, in line with the Ombudsman’s remit, our assessment considered the landlord’s response to her formal complaint. This was broadly reflected in the timeline above. It may help to explain that, in general, landlords need to be given a fair opportunity to investigate and respond to any issues prior to the Ombudsman’s involvement.
If the resident remains unhappy, she can bring any other concerns to the Ombudsman once the landlord has responded at stage 2.

Determination (decision)

In accordance with paragraph 52 of the Housing Ombudsman Scheme there was maladministration in respect of the landlord’s:
1. Response to the resident’s concerns about a service charge refund.
2. Complaint handling.

Reasons

Though it acknowledged a discrepancy, the landlord failed to recognise, and therefore redress, the resident for the additional accounting failure that she highlighted. It also failed to recognise that she was given incorrect information about the number of changes made to its accounts. This was unfair and inappropriate.
The landlord failed to address complaint handling delays and failures that occurred at stage 1. The evidence suggests this was either due to a lack of thoroughness or a failure to follow-up. In any case, it shows they remain unaddressed around 16 months later. This was unfair and inappropriate.

Orders and recommendations

Orders

The Ombudsman orders the landlord to apologise to the resident for the key failures identified in this report. The apology should acknowledge the landlord failed to; fully address its additional accounting failure and its related wrong information, and failed to address complaint handling delays and failures at stage 1. Within 4 weeks, the landlord should share a copy of its letter/call summary with the Ombudsman.
The Ombudsman orders the landlord to pay the resident a total of £725 in compensation within 4 weeks. Compensation should be paid directly to the resident and not offset against any arrears. The compensation comprises:
1. £75 for any distress and inconvenience the resident was caused by the landlord’s above identified failures in responding to her service charge concerns.
2. £75 for any distress and inconvenience the resident was caused by the additional complaint handling failures identified above.
3. £450 which the landlord previously awarded at stage 1.
4. £125 which the landlord previously awarded at stage 2.
5. The landlord is free to deduct any amount it has previously paid from the above total.
The landlord to share the report’s key findings with relevant staff for learning and improvement purposes. Specifically, overlooked issues and impacts are a technical failure which will likely result in maladministration findings from the Ombudsman (even if the landlord has addressed other issues well). To avoid this, the landlord’s complaint investigations should consider the whole complaint journey from beginning to end. The landlord should share a copy of its relevant internal communication with the Ombudsman within 4 weeks.

Recommendations

The landlord to update the resident about its progress with the new accounting method/system described during its update to the Ombudsman in late 2023.
The landlord should provide evidence it has complied with the above orders and confirm its intentions with regards to the recommendation within 4 weeks.