Freebridge Community Housing Limited (202302955)

REPORT

COMPLAINT 202302955

Freebridge Community Housing Limited

30 January 2025

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:
   1. the increase in the resident’s service charges.
   2. the landlord’s consultation before the increase in service charges.
   3. the landlord’s response to the resident’s request to be proportionally billed for specific heating use.
   4. the landlord’s communication about undercharges.
2. The Ombudsman has also considered the landlord’s complaint handling.

Background

3. The resident has an assured shorthold tenancy from the landlord, which began on 23 November 2020. The property is a one-bedroom first floor flat in a sheltered scheme. The landlord has recorded the resident as having mobility issues. The resident pays variable service charges, which include the cost of heating to her property. This is a communal heating system, which the landlord apportions the cost of to each property.
4. In September 2022, the landlord informed the resident that it would be adding £711.84 to her service charges for the next financial year of 2023-24. The resident contacted the landlord again on 7 April 2023 to request a response to the concerns she had raised at a residents meeting on 7 March 2023. These included concerns about the increase in service charges and the apportioning of heating costs per property rather than per occupant, which the resident felt was unfair. The landlord responded to the resident and provided an answer to her queries. It also said that it had arranged a residents meeting for 22 May 2023, and that representatives from its energy department would attend and answer residents’ questions.
5. In April 2023, the resident complained that:
   1. she was unhappy with the increase in service charges.
   2. she wanted to know why there was no consultation before the increase.
   3. she would withhold the additional charges until the landlord had answered her questions.
   4. she wanted to know why she was paying the same amount for heating that a couple would pay, when she did not use as much.
   5. she would like the landlord to consider installing separate meters in each property.
6. The landlord sent its stage 1 response on 5 May 2023, in which it said:

Increase in service charges and heating

1. the reason for the increase in service charges had been the increase in energy prices for both gas and electricity.
2. it determined the service charges taking into account actual bills, future estimates, and any under or overcharge from the previous year.
3. the resident’s tenancy agreement allowed for review of service charges once annually.
4. it was a common approach across the social housing sector to split the bills between the number of properties and not the number of occupants.
5. it believed this was the fairest method for providing fair service charges.
6. it worked with an energy broker to ensure the most competitive deal was negotiated.
7. it did not have capacity to absorb the increase.

Lack of consultation

8. it had acted in accordance with current legislation regarding service charge increases.
9. it accepted it would have been good practice to hold a residents meeting to provide answers to questions before the increase, which it would consider in the future.

Resident withholding the increase

10. it appreciated the increase was difficult for residents.
11. it had tried hard to explain the energy increases and how this factored into the service charge.
12. it hoped the meeting on 22 May 2023 would provide further clarity on why the increase was necessary.

Meter in individual properties

13. it would discuss this at the meeting on 22 May 2023, when experts could provide feedback on whether this was possible.
14. residents would have an opportunity to comment on whether this would be something they would agree to.

7. On 8 May 2023, the resident informed the landlord that she remained dissatisfied because:
   1. she did not agree that she should be paying the same as other residents when she did not use as much heating.
   2. the landlord had added an undercharge of approximately £700 to her account from the previous resident, which she said was unfair.
8. On 19 May 2023, the landlord sent its stage 2 response, which said:
   1. the process it followed for variable service charges was in line with all relevant regulations and requirements.
   2. this meant that the resident in occupancy was responsible for any under or overcharge relating to previous service charges.
   3. the under or overcharge was charged to the property, not to the occupant.
   4. it was not in a position to waive any undercharge.
   5. it recommended the resident apply to the tenant support fund for assistance.
9. In communication with the Ombudsman, the resident said it was unfair that the landlord had charged her for services she had not used by way of the undercharge. As an outcome, she said she would like the landlord to acknowledge this system was unfair and to consider reimbursing some, if not all, of the £700 she had paid.

Assessment and findings

Jurisdiction

10. What we can and cannot consider is called the Ombudsman’s jurisdiction. This is governed by the Scheme. When a complaint is brought to the Ombudsman, we must consider all the circumstances of the case as there are sometimes reasons why a complaint will not be investigated.
11. The resident has raised concerns around the increase in service charges for 2023-24, and the landlord’s consultation with residents prior to this increase. The Service Charges (Consultation Requirements) (England) Regulations 2003 set out the precise procedures landlords must follow for section 20 consultations. Where a landlord needs to deviate from this process it must apply to the First-Tier Tribunal (FTT) for dispensation.
12. In this case, due to the sharp increase in energy prices, the service charges for heating had increased significantly. The landlord used an energy broker to obtain bids from energy suppliers for the most competitive rates. It needed to make a quick decision because quotes provided by energy companies are only valid for one day, on the day they are provided. The landlord said it was therefore not possible to complete the section 20 consultation process.
13. The landlord applied to the FTT for dispensation from the requirement to consult with residents about the service charge increase. The FTT granted the dispensation on 14 March 2024. As part of the application process, the landlord was obliged to keep the residents updated. The application and all supporting evidence were placed on the landlord’s website. The resident would therefore have had opportunity to submit any comments or objections to this application via this process.
14. After carefully considering all the evidence, in accordance with the Scheme, the Ombudsman cannot consider the resident’s complaints regarding the increase in service charges or the lack of consultation prior to the increase. This is because, under paragraph 42.d. of the Scheme, the Ombudsman may not consider complaints, which in the Ombudsman’s opinion, concern levels of rent or service charge or the amount of the rent or service charge increase. In addition, under paragraph 42.f. of the Scheme, the complaint concerns matters where the Ombudsman considers it quicker, fairer, more reasonable, or more effective to seek a remedy through the courts, other tribunal, or procedure.
15. The FTT can make determinations on all aspects of liability to pay a service charge, including by who, to who, how much, and when a service charge is payable. In order to decide liability, the FTT also decides whether service charge costs have been reasonably incurred and, if so, whether the standard of any services or works for which the costs are charged is reasonable. Accordingly, where there is a dispute about such matters, it is more appropriate for the matter to be considered by the FTT.

Proportionate billing for specific heating use

16. When a resident raises a request with a landlord, the Ombudsman expects the landlord to consider this, and provide a timely and clear response, setting out its position. In this case, the resident lived in a sheltered scheme, where the resident’s heating in her property was provided by a communal heating system. This was paid for via a variable service charge.
17. In her complaint, the resident said she was unhappy because she was a single person who was being charged the same amount for her heating as a couple. She also referred to only using one radiator in her property between November and March, while other residents used more radiators and for longer periods of time. She said this system was unfair and she wanted the landlord to consider installing single meters to each property, so that she only paid for the energy that she used. The apportioning of the cost of the heating is not something that the Ombudsman can consider because it relates to the amount of service charges. As set out above, this would be more appropriate for the FTT to consider. However, we have considered the landlord’s response to the resident’s request for individual meters to be installed in each property.
18. The landlord operates a communal heat network at the scheme where the resident’s property is located. A communal heat network is a centralised large heating appliance located on the scheme, which provides heating to each property. The landlord receives one bill for the heating costs for all properties and apportions the charges to each property by way of service charges.
19. The Heat Network (Metering and Billing) Regulations 2014 (the regulations) sets out criteria for the operators of heat networks. This includes guidance on the installation of metering devices on those networks. In 2020, amendments to the regulations introduced building classes, which provided guidance to landlords, with unmetered networks, to identify buildings where metering devices were required. There are 3 building classes:
    1. viable – meters must be installed.
    2. open – meters must be installed if the result of a cost-effectiveness assessment is positive.
    3. exempt – meters do not have to be installed.
20. Building classes which come under the exempt criteria include where the building use is wholly or partially used for supported housing. This would include retirement and sheltered accommodation, such as the resident’s property.
21. In February 2023, the landlord wrote to all residents setting out the service charges for the coming year. This included a significant increase in the heating charges. The landlord held a meeting on 7 March 2023 to discuss these increases with residents. It also wrote to all residents on 23 March 2023 advising that it had put more money aside in its tenancy support fund to help residents with increasing energy charges. It referred to the government’s energy bill support scheme and offered to help anyone who was not in receipt of this. It provided details of resident drop-in sessions, the first one being on 22 May 2022, when it would attend with representatives from its heating and energy team to discuss the reasons for the increases and provide advice to residents on reducing energy bills in the future. 
22. On 7 April 2023, the resident asked the landlord if it would consider fitting meters to individual properties so that residents had control over their own bills. The landlord spoke to the resident on 20 April 2023 about the service charges and explained how these were calculated and the property rate charges.
23. In its stage 1 complaint response on 5 May 2023, the landlord acknowledged the resident’s frustration and concerns regarding the energy increases, which had been caused by the global energy market. It agreed to discuss the subject of individual meters at the meeting on 22 May 2023. The landlord has informed the Ombudsman that this was an informal drop-in session and no minutes were taken. However, it has said that it answered all residents’ queries at the meeting, which it said included discussing individual meters.
24. Having considered the evidence in this case, the landlord’s decision not to install individual meters in the properties was reasonable. This is because, according to the regulations, the resident’s property was one used for supported housing and was therefore exempt from requiring individual meters.
25. There is evidence that the landlord engaged with the residents by way of residents meetings and written correspondence. The landlord recognised the concern the increase would cause, and assured residents that it would try to help as much as it could to reduce the impact on residents. The landlord’s actions demonstrate that it was taking the resident’s concerns seriously and, further, that it had recognised learnings in that it would try to meet with residents prior to the increase in service charges in the future to enable views to be aired, listened to, and feedback given.
26. Although the landlord was unable to fulfil the resident’s request to control the level of space heating in her property, this lack of control applies to all residents within the building. Additionally, the landlord’s decision to charge residents based on the property was a reasonable approach. This was because the cost of energy for space heating was based on the actual property, rather than the number of occupants. This was fair, and the landlord explained this within its formal responses. It is appreciated that the high increase in the energy costs would have been worrying for the resident, however this was the same for all residents within the scheme. There is no evidence the resident was treated unfavourably by the landlord.
27. In the circumstances, while not downplaying the effect this situation had on the resident in this case, there was no maladministration in the landlord’s handling of the resident’s request to be proportionately billed for specific heating use.

Undercharges communication

28. The resident moved into the property in November 2020. At the start of her tenancy, the landlord provided the resident with an addition to her tenancy agreement, which set out all the service charges she was required to pay.
29. In September 2022, the landlord wrote to the resident with her annual service charge statement for actual costs incurred between 1 April 2021 to 31 March 2022. The statement referred to an amount of £711.84, which the landlord had added to the resident’s total service charges for 2023-24. It was not clear from the landlord’s correspondence why it had added this amount. However, the landlord did outline that the resident would likely see a difference in gas and electric costs due to the national energy increases. It said it understood this would be a concern for residents and it was working with agencies to keep these costs at a minimum.
30. The landlord’s rent setting and service charges policy says that, each February, it will estimate the cost of providing the service for the coming year. The new charge will then take effect from the first Monday in April. Each September, the landlord will calculate the actual cost from the previous year. Any difference, surplus, or deficit (overcharge or undercharge), between the service charge set and the actual cost of the service will be reflected in the service charge for the following financial year in its February calculations. This is confirmed in the resident’s tenancy agreement.
31. In April 2023, the resident complained to the landlord about the increase in her service charges. Following the landlord’s stage 1 response on 5 May 2023, the resident remained dissatisfied and asked the landlord to escalate her complaint to stage 2. Within her escalation request, the resident referred to the undercharges which had been on her September 2022 statement, which she believed the landlord had carried over from the previous occupant of her property. She said this was unfair and she had not been in the property long enough to build up this charge.
32. In its stage 2 response, the landlord explained that any undercharges or overcharges were charged against the property and not the occupant. This meant that the resident in occupation of a property was responsible for any under or overcharge relating to service charges, even if the resident was not in residence at the time. The landlord said that it appreciated this was not the outcome the resident was looking for, but it was not in a position to waive any of the undercharge. The landlord acknowledged the increase in energy costs and the hardship this may have caused and recommended the resident apply to its tenant support fund for assistance.
33. Having considered the evidence in this case, it would appear that the undercharge of £711.84, which the resident referred to in her complaint, had occurred during the period of 1 April 2021 to 31 March 2022. It was therefore accurate that the landlord explained this undercharge to the resident’s service charge bill was added because the resident in occupation of a property was responsible for any under or overcharge, and the charges had occurred during the time she had held a tenancy. This was consistent with the landlord’s policy and the resident’s tenancy agreement.
34. However, it is unclear why the resident believed this undercharge occurred under the previous tenant. When dealing with service charges, the Ombudsman would expect landlords to be able to provide clear and transparent information about a charge that is payable. It is unclear whether the landlord’s stage 2 response had fully investigated the resident’s concerns about its undercharge communication and provided a clear explanation. We have referred to this in the complaint handling section of this report.
35. The resident has said that she and other residents have been affected by undercharges on their accounts from previous occupants, and she was concerned about this happening again in the future. The Ombudsman cannot, however, look at the level or reasonableness of such service charges, as outlined above in the jurisdiction section of this assessment.
36. It is positive to note that the landlord has amended the layout of its service charge statements and they now clearly show where the undercharge or overcharge has occurred.
37. In summary, there was no maladministration in the landlord’s communication about undercharges because it accurately explained these were costs the tenant of the property was obliged to pay.

Complaint handling

38. The landlord operates a 2-stage complaint process. At stage 1, the landlord will acknowledge the complaint within 5 working days of receipt and will provide its response within 10 working days of receipt. At stage 2, the landlord will acknowledge escalation of the complaint within 3 working days and provide its response within 20 working days of receipt of the escalation request.
39. The Housing Ombudsman’s Complaint Handling Code (the Code) sets out the Ombudsman’s expectations for how landlords should handle complaints. This includes an expectation that landlords will respond to complaints within the above timescales.
40. The resident made her initial complaint on 13 April 2023. The landlord delayed in acknowledging the complaint and sent its stage 1 response on 5 May 2023, which was 16 working days after the initial complaint. This was not appropriate because it was not consistent with the landlord’s complaints and compliments policy or the Code.
41. The resident remained dissatisfied and escalated her complaint on 8 May 2023. The landlord sent its stage 2 response on 19 May 2023, which was 9 working days later. This was appropriate because it was consistent with the landlord’s policy and the Code.
42. The Ombudsman would expect the landlord to conduct a thorough investigation into the resident’s complaint. Paragraph 4.7 of the Code in force at the time of the complaint states that the complaint handler must consider all information and evidence carefully. In this case, the landlord provided the resident with its mechanism for working out variable service charges. However, there is no evidence that the landlord properly investigated the resident’s concerns about the communication of the undercharge on the resident’s service charge statement in September 2022. Had it done so, it would have identified that the undercharges the resident was referring to had accrued between 1 April 2021 to 31 March 2022, which was when the resident had occupied the property.
43. The landlord should have recognised this and given the resident an accurate response to her complaint. This may have answered the resident’s complaint at this point and she would not have had to progress her complaint to the Ombudsman for an independent investigation. The landlord did not do this in this case, which was a failure and caused inconvenience to the resident.
44. The Ombudsman’s remedies guidance, which is available online, provides awards of compensation between £50 and £100 when there is evidence of a service failure by the landlord, which may not have significantly affected the overall outcome for the resident. The Ombudsman has therefore ordered the landlord to apologise to and pay the resident £100 compensation to reflect the distress and inconvenience caused by the landlord’s above poor handling of the resident’s complaint.
45. The Ombudsman previously ordered the landlord to carry out a senior management review to identify learning and improve its working practices under paragraph 54.g. of the Scheme in relation to responding to complaints in line with its policy. Some of the issues identified in this case are similar to the case already determined. The landlord has demonstrated compliance with our previous wider order, so we have not made any orders or recommendations as part of this case that would duplicate those already made to landlord. The landlord itself should consider whether there are any additional issues arising from this later case that require further action.

Determination

46. In accordance with paragraph 42.d. of the Scheme, the resident’s complaint about the increase in services charges is not within the Ombudsman’s jurisdiction to investigate.
47. In accordance with paragraph 42.f. of the Scheme, the resident’s complaint about the landlord’s consultation prior to the increase in service charges is not within the Ombudsman’s jurisdiction to investigate.
48. In accordance with paragraph 52. of the Scheme, there was no maladministration by the landlord in its response to the resident’s request to be proportionally billed for specific heating use.
49. In accordance with paragraph 52. of the Scheme, there was no maladministration by the landlord in its communication about undercharges.
50. In accordance with paragraph 52. of the Scheme, there was service failure by the landlord in its handling of the resident’s complaint.

Orders

51. The landlord must, within 28 days of the date of this determination:
    1. apologise in writing to the resident for its failings in this case.
    2. pay the resident compensation of £100 for the distress and inconvenience caused by the landlord’s poor handling of the resident’s complaint.
52. All payments must be paid directly to the resident and not credited to the rent account, unless otherwise agreed by the resident.
53. The landlord must provide the Ombudsman with evidence of how it has complied with the above orders within 28 days of the date of this determination.