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Shepherds Bush Housing Association Limited (202125560)

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REPORT

COMPLAINT 202125560

Shepherds Bush Housing Association Limited

8 March 2023


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

  1. The complaint is about the landlord’s handling of the valuation of the resident’s property, and the extension of the lease.

Background

  1. The resident occupied a house under a shared ownership lease. The resident owned 50% share of the lease.
  2. On 8 July 2020, the resident asked the landlord if there were any discounts available to him to purchase the outstanding 50% share of the property. The landlord replied that there were no discounts available. It signposted the resident to the incentives of staircasing, so he could pay to increase his share in the property, if he wished to.
  3. The resident contacted the landlord on 23 October 2020, informing it that he wanted to sell his 50% share of the property. The initial valuation of the property by the landlord’s surveyor was £525,000. The buyer’s surveyor revalued the property £495,000. The sale of the property was completed on 26 September 2021 for £450,000.
  4. On 27 April 2021 the resident confirmed in writing that he agreed to the sale at the value of £450,000. The resident later stated that they only accepted the offer because:
    1. The property they were looking to purchase was at risk of going back on the market.
    2. Further delays might lead to a job offer being withdrawn.
    3. The buyer of their property might pull out.
  5. The resident raised a formal complaint to the landlord on 25 October 2021. This was in respect of its handling of the valuation of the property and delays caused by the extension of the lease. The resident was seeking an explanation to the following:
    1. Why the surveyor from the landlord’s recommended list, altered the valuation of the property downwards by £30,000, over a three-month period.
    2. Why he was not informed the valuation of the property was negotiable.
    3. Why the landlord did not inform him that he was entitled to a lease extension of a further 50 years.
  6. The resident was seeking compensation to the value of £43,748, broken down as:
    1. £4000 for the loss of earnings from June 2021 to September 2021.
    2. £342 for the fees paid to the surveyor for the valuation.
    3. £1906 for rent paid to the landlord between June 2021 and October 2021.
    4. £37,500 for 50% of the difference between the property’s initial valuation, and the actual sold price.
  7. The landlord’s stage one response to the complaint was on 08 November 2021. It’s final response was then issued on 26 November 2021. It advised the resident that he was responsible for arranging the valuation and extension of the lease. In recognition of the delays to the sale, the landlord offered to waive its fees for the deed variation, management pack to the property and the extension of the lease. It also offered the resident £20 compensation for its delay in sending out the updated memorandum of sale. The total compensation offered by the landlord was £2770.
  8. The resident contacted this service on 21 February 2022, stating his desired outcome was for an increase in the level of compensation. He wanted an explanation for the different valuations provided by the recommended surveyor. He also wanted to know why he was not informed at the beginning of the sale, that he was entitled to a lease extension.

Assessment and findings

Policy and Procedures

  1. In accordance with the lease, the resident has to serve notice to the landlord if he wants to sell the property. The resident would then need to get a valuation from a surveyor from a list of approved surveyors provided by the landlord. The landlord would then advertise the property through its resale nomination process for eight weeks. After the eight weeks, if the landlord did not find a suitable purchaser, the resident could sell the property on the open market.
  2. Under the landlord’s lease extension policy, shared ownership leases with less than 100% equity, have no statutory right to extend their lease. However, the landlord would consider all requests from shared owners to extend their lease on a discretionary and non-statutory ‘informal’ basis. This would be in accordance with industry best practice for shared ownership leases. It is the resident’s responsibility to request a lease extension.
  3. Under the landlord’s compensation policy, it would consider discretionary payments up to £250 following a service failure. This is for cases of inconvenience, hardship, distress or a making good payment. It would also consider a goodwill gesture or discretionary payment up to the value of £50, in recognition of distress or inconvenience, where it may have taken repeated attempts to put things right.

The valuation of the property

  1. The landlord responded promptly to the resident’s initial request to sell the property and the valuation was completed in good time. The valuation was valid for three months. On 8 March 2021 the landlord identified a nominated buyer for the property at the value of £525,000. As the valuation was out of date, the original surveyor completed a desktop survey of the property on 24 March 2021. It was reasonable for the landlord to request a further survey as the original survey was out of date.
  2. Around March 2021, the resident instructed two local estate agents to value the property. Both agents valued the property between £450,000 and £460,000. The resident decided to continue the sale to the landlord’s nominated buyer as he believed this would result in a sale price of £525,00 based on the surveyor’s valuation.
  3. In April 2021, the buyer’s mortgage lender provided a lower valuation of £450,000. The landlord has said the valuation may have been lowered because the lease only had 71 years left and lenders may be reluctant to provide mortgages to properties with less than 80 years left on the lease. Although this explanation was given by the landlord, the Ombudsman has not seen any communication from the mortgage lender, confirming this was the reason for the lower valuation. Therefore, we are unable to confirm why the valuation was lower. It is important to be aware that there can be differences of opinion between valuers, and it is not guaranteed that a property would be sold for the valuation given by a surveyor. Although the landlord provided a list of approved surveyors for the resident to use, the surveyor is independent from the landlord and the landlord was not at fault for the surveyor giving a different valuation from the mortgage lender and had no obligation to compensate the resident for this difference in price. The resident was entitled to arrange for another surveyor to value the property if he wished to challenge the surveyor’s valuation and the landlord advised him of this option in its complaint responses. The landlord also stated that due to feedback it had received, it had recently removed the surveyor from its recommended list as there had been similar discrepancies in other valuations. By removing the surveyor from its list, the landlord has shown that it has learned from the resident’s feedback to improve the sales process for its residents.
  4. The Ombudsman is not questioning the resident’s reasons for going ahead with the sale. We can understand that this would have been a difficult situation for him. However, ultimately, it was the resident’s choice to sell the property for £450,000. Therefore, the resident would not be entitled to claim the difference between the original surveyor’s valuation and the sale price from the landlord.
  5. The landlord took 32 days to send the updated memorandum of sale at the revised price of £450,000. Within this time, the landlord asked the surveyor to carry out a further desktop review. There was then a discrepancy between the surveyor’s valuation and the mortgage valuation. The landlord would not allow the sale to proceed at the lower price and this delayed the sale. On 9 June 2021, the landlord acknowledged both the delay and its own mistake, in stating it would not agree to the sale. It explained the confusion and delay was due to its staffing movements. The landlord offered the resident £20 compensation in view of the delay. Taken in isolation, £20 would not be sufficient compensation for the distress and inconvenience caused by the delay. However, in the context of the landlord’s overall offer of £2770, it was reasonable redress.

The extension of the lease

  1. In June 2021, the landlord advised the resident that the buyer’s mortgage lender had refused to lend on the property. This was due to the lease having less than 80 years left and a rent review clause within the lease. The landlord informed the resident that they would need to pay a premium of £5000, plus legal fees in order to extend the lease. This was in line with its lease extension policy. The resident agreed to pay half of the premium, with the buyer offering to pay the other half.
  2. The landlord agreed to amend the rent review clause to 0.5% per annum, which would then increase yearly, in line with inflation to meet the lenders criteria, to allow the sale of the property to continue. This was a fair and considered approach by the landlord. The landlord was not strictly obliged to do this, but it did so in order to assist the sale and allow it to proceed.
  3. Throughout July 2021, the resident and their solicitor had to contact the landlord a number of times, due to its delays in completing the deed variation, and in providing the buyers management pack. The landlord recognised it was causing further a delay to the sale and waived the £2500 premium fee. It also waived the £250 fee for the management pack. This was a reasonable response from the landlord to compensate the resident for the distress and inconvenience caused by this delay.
  4. Although it was the resident’s responsibility to extend the lease, the landlord would be expected to give the resident clear information on how to do this, upon request. The landlord should have been aware during the sales process that the resident would need to extend the lease so that the buyer could get a mortgage. It should have given appropriate advice on how to do this, but the evidence suggests that the correct advice was not given until later in the process, adding to the delays.
  5. The value of compensation offered by the landlord in its response to the resident’s complaint was appropriate, in consideration of the collective delays caused by the landlord’s errors, as well as the impact and inconvenience its handling of the valuation and lease extension, had on the resident. It is important to note, that the total value of compensation provided by the landlord in this case of £2770, exceeds the amount the Ombudsman would have ordered the landlord to pay if it had not already made an offer. The Ombudsman’s approach to compensation is set out in our remedies guidance, published on our website. In line the remedies guidance, the Ombudsman would have awarded redress within the compensation range for up to £600 for cases where the landlord made errors which affected the resident, but the error may not have had a permanent impact. As explained above, the landlord would not be held responsible for the difference in price between the surveyor’s valuation and the mortgage valuation and therefore the compensation would not be linked to this.

Determination (decision)

  1. In accordance with paragraph 53(b) of the Housing Ombudsman Scheme, the landlord has made an offer of redress prior to investigation which, in the Ombudsman’s opinion, resolves the complaint about the valuation of the property, and the extension on the lease satisfactorily.

Recommendations

  1. The landlord should pay the resident the £20 compensation which it offered during the complaint procedure if it has not already done so.