MHS Homes Ltd (202208094)

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REPORT

COMPLAINT 202208094

MHS Homes Ltd

27 March 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

The complaint is about the landlord’s:
1. Decision to move a wall in the property, including the lack of notice and financial impact of this.
2. Response to the resident’s reports that he did not have to pay service charges until defects were resolved.
3. Response to a request to buy back the property.
4. Handling of reports of an issue relating to pet ownership.
5. Handling of the complaint.

Background

The resident is a leaseholder living in a fifth floor, two-bed flat. The lease began on 6 June 2016. At times throughout the process of this complaint, the resident had a shared ownership agreement with the landlord, however he later ‘staircased’ to owning the property outright.
The resident’s complaint was multi-faceted and included the following issues:
1. The landlord moving a wall within a cupboard in his property, which he said reduced the available floorspace and, in turn, meant that units he had bought would no longer fit. The resident also said that this would reduce the value of his property by around £2,000. The movement of the wall was undertaken as part of works to address a foul smell entering the resident’s property from the soil stack.
2. The resident had a phone call with a director of the landlord in 2019 to discuss various outstanding works and ‘snagging’ issues. In this meeting, the resident asserted that the director had said that he did not have to pay the service charge on his property whilst works were outstanding. Subsequently to this, the landlord advised the resident that he was in arrears for non-payment during this period. The resident contested the validity of these charges.
3. As part of the resolution to both the ongoing repairs issues and the movement of the wall, the resident requested that the landlord buy back his property into its affordable housing stock at the market rate, plus ten percent. This was declined by the landlord and the resident complained about the rationale of this decision.
4. The resident was asked by the landlord to give up his pet in 2017. The resident complained that the landlord had permitted other occupants in the property to keep pets and queried the fairness of this decision.
5. The resident complained that the landlord’s complaint handling had not been in line with its policy and that it had discriminated against him in its processes.
The resident raised complaints on 1 and 4 April 2022 and the landlord issued its stage 1 complaint response on 26 April 2022. The landlord’s response said that:
1. The loss of space experienced by the resident was only 0.28m and that the works had been pre-approved by the resident. It said it was not possible to move the wall back as this would revert the works completed to address the foul smell entering the property.
2. It had agreed to pause collection of the service charges whilst it completed the works, but not to remove the charges completely. It confirmed that the resident would be required to pay the accrued debt once it had completed the works satisfactorily.
3. It would not be able to buy back the property as it “would not be in line with [its] social purpose of ensuring value for money.”
4. It could find no evidence of discrimination in its handling of the resident’s case.
5. It acknowledged that there had been some communication failings and delays in works being completed within the property. It said that it had embedded learning to improve communication going forward and offered £50 compensation in respect of the delays.
6. It apologised for the delay in issuing the stage 1 complaint response and offered £10 compensation for this.
On 28 April 2022, the resident escalated his complaint to stage 2. He said that:
1. He was not told that the contractors would move the wall, prior to the work being completed. He also felt that the vent which was installed could have been smaller and this would not have required the wall to be moved.
2. He planned to fit a utility room into the cupboard and had purchased units for this, which now did not fit into the space. Additionally, the resident said that a member of the landlord’s staff had indicated, during a visit, that it would cover the costs he had incurred and that this had not happened.
3. He had spoken to a member of the landlord’s staff about the service charges and that she had agreed with his interpretation that the landlord would be voiding the charges for the period of repairs.
4. He felt like he was being treated as a “second–rate citizen”, particularly in the landlord’s response to his request for it to buy back his property. He felt that the landlord prioritised and gave preferential treatment to other residents who occupied the property under social housing tenancies, or who were a different ethnicity.
5. He was told in 2017 that the landlord may evict him if he kept his pet dog. Conversely, he had seen several other residents within the block having pets and felt that this was an unfair decision.
The landlord issued its stage 2 complaint response on 13 May 2022 in which it said that:
1. The works it had completed to the soil stack, which affected the wall, were in line with the plans. It also said that property value is determined by living space and therefore this alteration would not impact this. It acknowledged that best practice would have been to present the full proposal to the resident prior to completing the works. It apologised that it had not done this and offered £25 compensation.
2. It had spoken with the director concerned about the resident withholding service charge. The director had confirmed that this was only pausing collection of the service charge until it had completed the works, not voiding the charges, which the resident remained liable for.
3. The resident’s lease did allow for a buy back option, however it could only utilise this when there was a shortage of need for shared ownership properties and no additional funding would be required for the purchase. As this was not the case at the time of the request, the landlord said buying back the property in this way would breach the resident’s lease.
4. It had seen no evidence of discrimination in its complaint handling or other practices related to the resident. The landlord said that any differences in approach were only to comply with the resident’s lease or other legal obligations.
5. It apologised for the comments made by its member of staff and said that he was not in a position to make the commitments he had. The landlord had addressed this with further training and offered the resident £250 compensation for the misleading comments.
The resident remained dissatisfied and escalated his complaint to the Ombudsman on 30 August 2022.

Assessment and findings

Scope of investigation

As part of his complaint, the resident raised concerns about the payment of service charges whilst the landlord made ongoing repairs to his property.
Paragraph 42 (d) of the Housing Ombudsman Scheme says that the Ombudsman may not consider complaints which, in the Ombudsman’s opinion, concern the level of rent or service charge or the amount of the rent or service charge increase.
On this basis, this Service will consider the landlord’s handling of the service charge complaint and its communication with the resident, but we will not consider the level or increase of any service charge payments. Should the resident wish to pursue this matter, he could refer it to the First Tier Tribunal (Property Chamber), who are empowered to decide on whether the rate, and any increase to, service charges and rent are fair.
Additionally, the resident raised issues about the movement of a wall within his property and the effect that this may have had on the value of his property overall as a result.
Paragraph 42 (f) of the Housing Ombudsman Scheme says that the Ombudsman may not consider complaints which, in the Ombudsman’s opinion, concern matters where our Service considers it quicker, fairer, more reasonable, or more effective to seek a remedy through the courts, other tribunal or procedure.
The movement of a wall may potentially have implications that affect the wider property value, generate significant legal costs, and require a variation to the lease under Section 35 of the Landlord and Tenant Act 1985. Given these considerations, the Ombudsman considers that the First Tier Tribunal (Property Chamber) could more efficiently and fairly decide this element of the complaint.
The Ombudsman will consider the landlord’s communication and record keeping in relation to the movement of the wall but will not consider the effect of this on the property’s value or legal status within the lease. If the resident wishes to pursue these matters, we advise him to seek independent legal advice to make a claim to the tribunal.

Moving a wall in the property

Between 1 and 18 February 2022, the landlord’s contractors attended the resident’s property to address a foul smell entering from the soil stack. As part of this work, the landlord moved part of the wall to accommodate the new soil pipe trap and vent.
The resident said that the loss equated to around two cubic metres, which he valued (at the market rate at the time) as being worth around £2,000. The resident also complained that the landlord had not informed him of the change and that he only discovered it when he attempted to fit units that he had bought to utilise the space as a utility room.
The landlord’s stage 1 response stated that the actual loss of space within the property was 0.28 metres and that it was not possible to move the wall back as this was enclosing the soil pipe. The landlord said that it had agreed the works in advance with the resident and that it had made no alteration in the property which would affect its value.
The landlord’s stage 2 response upheld this view and said that the only deviation from the original building plans was the use of a false wall rather than two sets of boxing, but that this did not alter the dimensions. The landlord did acknowledge that “best practice” would have been for it to present its proposal for resolving the smell in the property to the resident, before works began. The landlord apologised for this, outlined that it had made changes to its practices and training to prevent a reoccurrence and offered £25 compensation.
As previously mentioned, it is not possible for this service to calculate the potential value of lost space within a property or any wider implications that this may have on the lease or service charges. The resident should address these complaints to the First Tier Tribunal (Property Chamber), who are able to consider specialist evidence from surveyors and others in coming to a determination.
Given the change may have impacted the resident’s use of the cupboard space, the landlord should have provided a more complete explanation prior to works commencing, or at the earliest opportunity when it identified that the scope had changed. Additionally, the landlord said in its stage 1 complaint response that the works had previously been approved by the resident, however no evidence has been provided to substantiate this. The landlord should ensure, moving forward, that it keeps adequate records of approvals and permissions to assist its own complaint handling and the investigations of this Service.
Notwithstanding this, it is noted that the landlord’s works resolved the issue of the foul smell entering the property satisfactorily and efficiently.
Overall, given the failure to communicate effectively with the resident about the change to his property, there has been a service failure in the landlord’s handling of this element of the complaint.

Payment of service charge

The resident’s lease agreement outlines the legal responsibility for the resident to pay service charge in equal instalments, alongside the rent.
Within his complaints, the resident said that he had a telephone call with one of the landlord’s directors on 19 December 2019. During this call, he said that the director had committed to voiding all service charges payable until the landlord had completed the works. There are no contemporaneous records or recordings of this conversation, given the length of time which has expired.
The landlord disputes this and says that the resident remained liable for these charges, but that it had paused collection and recovery of this money until it had completed the works. At the time of raising this complaint, the landlord advised the resident that the debt accrued to date was £4196.82.
Outside of the complaint responses, there is evidence that this matter was discussed on the following occasions:
1. On 21 April 2020, the landlord called the resident to discuss the arrears. During this phone call he indicated that he would continue to pay the charge as he felt guilty that other residents were paying it.
2. On 15 February 2022, the landlord called the resident to update him on the progress of repairs and work to the property. During this call, the landlord’s notes say that it advised him that, following completion of the work, “we need to go through his account as there is a large arrear on there, [the resident] was happy to do that as he had been holding back payment for some time.”
3. On 1 March 2022, the landlord called the resident to discuss the accrued debt. The resident asserted his position that he was not currently liable to pay and the landlord explained that this was not the case and that debt was accruing.
4. In its stage 2 complaint response, the landlord noted that it had spoken with the director that the resident had the telephone call with. The director confirmed that “the offer he made to [the resident] was to withhold payment until the required works were completed, on the understanding that [his] account would be brought back up to date once these required works were completed. At no point did he suggest [the resident] would never have to make these payments.”
5. In later correspondence on 12 December 2023, following further complaints about this matter, the landlord identified that the resident had signed up for its online portal in 2016. This portal gave the resident constant access to rent and service charge statements throughout this period.
The evidence shows that the resident had constant access to rent and service charge statements, via the landlord’s portal, during the course of this complaint. Considering this alongside the various communications from the landlord indicating that these amounts would remain payable once the works were completed, it is reasonable to conclude that he was, or could have been, aware of the accruing debt on his account. If the landlord had been voiding the charges on the resident’s account, this would have appeared on the statements immediately and thereafter on a monthly or annual basis.
On this basis, the landlord was entitled to retain the legal position outlined in the resident’s lease to collect the service charges that it had raised in the statements issued via its portal and therefore there has been no maladministration in the landlord’s handling of this element of the complaint.

Request to buy back the property

The resident’s property was a shared ownership property. The resident bought further shares in the property, which was permitted by the lease. This is often known as ‘staircasing’ and can be used to buy a larger or complete share of the property.
The landlord’s shared owner buyback policy sets out the process for selling a shared ownership property. This includes a requirement for the landlord to be given an opportunity to find a buyer prior to it giving permission for the resident to sell the property on the open market. The policy also says that “under no circumstance will [the landlord] consider purchasing the property back.”
As part of the resident’s complaint regarding the landlord’s contractors moving the wall in his property, he requested that the landlord buy back the property to offer as ‘affordable housing’. The resident asked for the landlord to buy the property at its market value, plus ten percent for the inconvenience. The resident also said that the reduction in space accounted for a loss of around £2,000 in the value of this property.
Both of the landlord’s complaint responses declined this request. The landlord’s stage 1 response indicated that buying back a property in this way “would not be in line with [its] social purpose of ensuring value for money.” Similarly, the stage 2 response upheld this view.
Whilst the landlord acknowledged that the resident’s lease did include an option for buyback, this was contingent on there being a clear shortage of need for shared ownership and no additional grant required to fund the purchase. The landlord indicated that there was still a strong demand for properties of this type and therefore the property must remain a shared ownership property. It suggested that buying the property as part of its affordable housing scheme may have been a breach of the resident’s lease.
The resident contested this on the grounds that he now owns his property outright and therefore, by the landlord’s explanation, it should buy back his property to provide more shared ownership properties within its stock. Whilst the landlord may elect to do this, there is no compulsion on the landlord by any legal or policy requirement, to buy back the property in this way.
Additionally, the resident’s request for the landlord to purchase his property and pay an additional ten percent above market value is likely to resulted in costs of around £25,000 based on the resident’s calculations. This is highly unlikely to have been possible or reasonable, given the landlord’s charitable status and the lease requirement stating that no additional grant funding may be sought to cover the purchase.
Given the combination of the landlord’s policy, the legal constraints placed upon on the landlord by the lease conditions and the clear explanations given to the resident in respect of this, there is no maladministration in the landlord’s handling of this request from the resident. In the evidence provided there is nothing to show that the landlord was under any obligation to buy back the property, particularly where this would deviate from its policy, social purpose or the legal requirements in the lease agreement.

Pet ownership within the property

The resident complained that he was required to give up his pet in 2017, whilst other residents in the property were permitted to keep pets. He felt that this was unfair and breached his lease agreement.
Schedule 2 of the resident’s lease agreement says that “No bird, fowl, dog, cat or other creature shall be kept in the premises.” The landlord’s tenancy management policy reinforces this statement by saying:
1. “5.3 Customers can have pets except those living in our foyers and those where the contract/lease expressly prohibits.”
2. “5.5 In addition, there are certain properties where pets are prohibited by the superior landlord, in covenants or in the lease and we will not be able to have pets in these properties.”
The landlord’s policy outlines a process whereby residents without these restrictions can request permission to keep pets and have these registered by the landlord. The policy also confirms that residents must adequately care for their pets, not allow them to cause a nuisance to other residents or cause damage to the property.
On this basis, the landlord was correct in asserting its legal obligation to ensure that the resident did not keep a pet in his property. Notwithstanding this, it would also be reasonable for the landlord to permit other residents occupying the property under different agreements to keep pets, provided they followed the process within its policy.
Overall, the landlord has applied its policy correctly in its handling of this element of the complaint and was entitled to rely on the covenants in the lease to prohibit the resident from having a pet. There has been no maladministration in the landlord’s handling of this element of the complaint.

Complaint handling

The landlord operates a two-stage complaint process. The landlord’s complaint policy and procedures show that it will issue stage 1 complaint responses within 7 working days and stage 2 responses within 15 working days.
The Ombudsman’s Complaint Handling Code (‘the Code’) which was in force at the time of this complaint, and is available on our website, sets out key complaint handling principles that all landlords are expected to abide by. This includes:
1. Resolving complaints at the earliest opportunity.
2. Resolving complaints within the timescales published in its policies.
3. Using complaints as “a source of intelligence to identify issues and introduce positive changes in service delivery.”
The landlord issued its stage 1 complaint response 16 working days after receipt of the resident’s complaint. This was more than the landlord’s policy timescale of 7 working days for stage 1 responses.
The landlord acknowledged this in its stage 1 response, in which it apologised and offered the resident £10 compensation. Given the relatively short delay in issuing the response, this level of redress was fair and proportionate.
Throughout the complaints process there is evidence of the landlord identifying learning and applying this to its practice. This included identifying issues with its communication and reviewing its processes and training for making proposals available to residents prior to works commencing. The Ombudsman considers that complaints are a vital tool for organisational learning and development and it is positive to see the landlord applying its learning in this way.
Finally, the resident also complained that the landlord had discriminated against him in its handling of his overall complaint. The resident said that he felt the landlord treated the social rented tenants, and those of a different ethnicity to him, more preferably.
The landlord considered and investigated this as part of its complaint responses and found no evidence of this. Similarly, this Service can find no evidence of less favourable treatment of the resident, in the evidence provided.
Whilst there have been instances where the landlord has treated the resident differently to other occupants of the building, this appears to have been related to legal requirements within his lease, rather than any discriminatory factor. An example of this can be seen in the landlord’s handling of requests for pets, where it was legally required to deny his request, whilst other occupants (with different tenancies) may have been subject to different approval processes.
Overall, the landlord has apologised for the delays in its complaint handling, provided proportionate compensation and investigated the resident’s claims of discrimination. More generally, the landlord has also indicated wider learning and has applied this to processes and training for its staff. On this basis, the landlord has made an offer of redress to the complainant prior to the investigation which, in the Ombudsman’s opinion, resolves this element of the complaint satisfactorily.

Determination

In accordance with paragraph 53 of the Housing Ombudsman Scheme the landlord has made an offer of redress to the complainant prior to the investigation which, in the Ombudsman’s opinion, resolves the following complaint satisfactorily:
1. The landlord’s handling of the complaint.
In accordance with paragraph 52 of the Housing Ombudsman Scheme there has been:
1. Service failure in the landlord’s decision to move a wall in the property, including the lack of notice and financial impact of this.
2. No maladministration in the landlord’s response to the resident’s reports that he did not have to pay service charges until defects were resolved.
3. No maladministration in the landlord’s response to the resident’s request for it to buy back the property.
4. No maladministration in the landlord’s handling of pet ownership.

Orders and recommendations

Orders

Within 28 days of the date of this determination the landlord is ordered to:
1. Pay the resident £250 compensation for the distress and inconvenience it caused by failing to inform him of the proposed changes to the wall within his property, prior to work commencing.
2. Review its record keeping practices related to consent and permissions given by residents, particularly leaseholders, for works to their properties. This review should identify whether any learning or process changes are required and how this will be embedded within the organisation within a period not exceeding 6 weeks. The Ombudsman’s report on Knowledge and Information Management (KIM) may assist with this.

Recommendations

The landlord should:
1. Pay the resident the £335 compensation offered in its stage 2 complaint response, if it has not already done so.