Lambeth Council (201911089)

REPORT

COMPLAINT 201911089

Lambeth Council

31 March 2021

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 response to resident’s reports about:
1. The administration of the service charge at the property.
2. The issuing of arrears letters and invoices by the landlord.
3. The landlord’s complaint handling.
4. The cost and level of service charge for works carried out at the property and the level of the electricity charges.

Jurisdiction

What we can and cannot consider is called the Ombudsman’s jurisdiction. This is governed by the Housing Ombudsman 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.
After carefully considering all the evidence, in accordance with paragraph 39(g) of the Housing Ombudsman Scheme, the complaint about the cost and level of service charge for works carried out at the property and the level of the electricity charges is outside the Ombudsman’s jurisdiction.
Paragraph 39(g) of the Scheme states that the Ombudsman will not investigate complaints which, in his opinion:

Concern the level of rent or service charge of the amount of the rent or service charge increase.

The resident stated that she remained dissatisfied with the cost and level of the service charge for works carried out at the property and the level of the electricity charges. Consideration of the level of service charge, or the level of service charge increase are issues appropriately dealt with by the First Tier Tribunal (Property Chamber). The tribunal is able to scrutinise the landlord’s calculations and distribution method of costs, it can also consider whether costs are reasonable and will also be able to look at the consultation process followed by the landlord, including the formal correspondence sent to the resident as part of this process.
The resident has also confirmed that she is dissatisfied with the landlord’s communication with her in relation to the administration of the service charge at the property and the amount of compensation. These issues are within the Ombudsman’s jurisdiction and have been considered below. Reference to the levels of service charge and service charge increase have been referenced in the below report for contextual purposes insofar as they relate to the issues under investigation.

Background and summary of events

Background

The resident has been a leaseholder at the property for over 18 years, the landlord is a local authority. The resident is required to pay a service charge to the landlord for services at the property and is subject to the covenants under the leasehold agreement.
Under section 2(B) of the lease agreement the resident ‘agrees to pay and discharge all general and other outgoings of an annual or other periodic nature’.
Section 4(B)(i)(a) of the lease agreement states that ‘the council shall keep proper books of accounts or other suitable documents showing the expenditure or liability that has occurred’.
Under section 4(C) of the lease agreement in the event of any dispute between the parties arising out of this clause the matter shall be referred to an arbitrator (who shall not be a member of the council) appointed by agreement between the two parties and cost split equally.
The landlord’s complaints policy sets out the different stages of the complaint procedure. The first stage is ‘local resolution’ in which a response would normally be provided within 20 working days. The second stage is the ‘review’ stage which also has a 20 working day timescale for response. The outcome of the review represents the landlord’s final response to the complaint, after which the owner could approach this Service. A complaint can be raised by ‘telephone, letter, e-mail, in person, through our website, or through third parties’.
The landlord’s compensation policy states that consideration should be given to applying a remedy where a service failure was found to have had an adverse impact on the complainant. The policy provides for compensation in the form of financial redress which can include ‘compensation, refund or a goodwill gesture’.

Summary of events

In September 2017, during scheduled works at the property it was discovered that there was an error with the block definition on the landlords system in that it only included two properties rather than the four specified in the resident’s lease agreement.
On 1 November 2018, the resident raised concerns to the landlord regarding the block charges and the distribution of service charge between the residents. She also raised issues with the level of the charge compared to the estimate. The landlord responded on 15 November 2018 and stated that it would investigate the breakdown of the service charge at the property.
On 13 December 2018, the resident stated that she had received a letter chasing payment of the service charge, but the landlord had not responded to her question regarding the breakdown of the fee.
On 17 December 2018, the landlord responded and stated that the bill was correct and that it had underestimated what the yearly charges would be.
On 18 June 2019, the landlord contacted the resident and confirmed that there had been an error with the block definition and that service charges would be refunded for the past six years. It advised that £470.156 had been removed from the resident’s service charge account from previous years and a revised statement would be issued. It stated that an adjustment would also be made once final bills for 2018/19 and 2019/20 were issued.
On 27 June 2019, the resident contacted the landlord and queried why some of the charges were halved and others quartered, this erroneous billing was acknowledged by the landlord on the 2 July 2019.
On 9 August 2019, the resident contacted the landlord and asked why she had received three letters chasing an incorrect service charge even though the landlord acknowledged that it was incorrect. She raised that she was extremely distressed as two of the letters had threatened court action against her and the issue had taken too long to be resolved.
On 13 August 2019, the landlord contacted the resident and confirmed that necessary amendments had been made to her account dating from 2014 and that a total of £548.21 had been credited.
On 19 August 2019, the resident queried a number of individual service charges and requested a breakdown from the landlord for years including 2013/14, 2017/18 and 2019/20. The landlord responded the same day and confirmed all years had been revised between four properties for all block charges not just electricity, the landlord copied in the Collections team to confirm this.
On 2 September 2019, the landlord contacted the resident and confirmed all necessary adjustments had been applied to her account and a statement was provided.
On 23 September 2019, the resident emailed the landlord and complained that she was received ‘threatening’ emails stating that the landlord would take further actions even though the landlord is aware of errors with her account.
On 4 October 2019, the landlord contacted the resident and advised that her account would be adjusted £2,062.72, this was confirmed on 16 October 2019.
On 21 October 2019, the landlord emailed the resident and apologised for the delay in resolving the issues and stated that it took time to amend all of the accounts. It apologised that the resident had not been updated in the interim and confirmed £2,610.93 had been removed from her account which included a disputed charge from the 2018/19 final bill. It apologised if any correspondence concerning arrears had caused upset or confusion, it explained that letters are sent out when there are outstanding arrears on the account, and whilst a note was applied to the resident’s account it was not possible to put a hold on system generated letters.
On 22 October 2019, the resident made a formal complaint to the landlord regarding unresolved billing of service charges at the property dating back 18 years. She stated that issues arose due to an incorrect listing of the block breakdown, the complaint raised the following issues:
1. That the landlord only offered ‘compensation’ back dated to 2014 as that is as far as the records exist and failed to offer compensation for the distress and inconvenience caused.
2. That she was unable to seek help over the phone which lead to ‘retracted communication’ and a delay in resolving the issue. The landlord also failed to return phone calls which lead to the resident having to reiterate the issues to multiple operatives.
On 22 November 2019, the landlord issued the resident with its stage one response. The landlord addressed the following issues:
1. It apologised for the delay in resolving the matter and confirmed that the Billings and Calculations team had amended the resident’s accounts accordingly. It acknowledged that this took some time and apologised that it did not keep the resident informed during the process.
2. Incorrect rateable value – it confirmed that £2610.93 had been removed from the residents 2018/19 service charge account which included £2062.72 for repair work invoices that were disputed by the resident through correspondence on 16 October 2019.
3. Compensation – it stipulated that it no longer holds records past a certain date and acknowledged and apologised for ‘keeping the resident in the dark’ and for the distress caused. It affirmed that the right repayment value had been added to the resident’s account and amendments made, however it was unable to offer any further compensation as they ‘acted in accordance with the lease agreement’.
On 29 November 2019, the resident requested escalation of her complaint to the final review stage of the process as she felt that the landlord overlooked issues and had not addressed the main complaint.
On 20 December 2019, the landlord acknowledged the residents review request and stated that it will provide a response by 9 January 2020.
On 9 January 2020, the landlord issued the resident with its stage two complaint review. The landlord gave a detailed history of events and addressed the following issues:
1. Service charge – it detailed how it had been using the incorrect block definition to the one described in the lease agreement. This meant that charges were split among two properties rather than four thus the resident having higher charges for the duration of her lease. It stated that reimbursement can only go back six years as that is as far back records go and not because of statutory requirements. It confirmed that adjustments have been made back until 2014 however it advised that if the resident had copies of invoices going back further than this it would be willing to consider backdating credits further.
2. Compensation – It stated that under its complaints policy it will not consider or investigate complaints where the cause of the complaint occurred more than six months prior to the complaint being raised, or normally address new issues that were not previously raised. The policy also states that compensation can be considered where service failures are identified.
3. Issuing of arrears letters – It apologised if any correspondence concerning arrears had caused upset or confusion, it explained that letters are sent out if there are outstanding arrears on the account, and whilst a note was applied to the residents account it was not possible to put a hold on system generated letters.
4. Service delivery – it stated that there were some identified issues with the quality of response and delays in communications. It had offered an apology for queries going unanswered and having to be re-raised and stated that it would be undertaking a review of these aspects towards improving future service. It added a further apology for the lengthy process in resolving the resident’s issues and for any delay. For these acknowledged failures it awarded the resident £100 compensation.
Since the stage two review response the resident has provided this service with a large number of emails, statements and documents regarding the cost and level of the refund provided by the landlord. As advised above in paragraph 4, this service is unable to make a decision in regard to these matters and it would need to be appropriately dealt with by the First Tier Tribunal (Property Chamber).

Assessment and findings

The administration of the service charge at the property and the amount of compensation offered.

Evidence provided by the resident demonstrates that the landlord was made aware of the error in regard to the block definition in September 2017. Both parties failed to recognise the service charge implications until it was raised by the resident on 1 November 2018. The landlord had an obligation under the lease agreement to keep proper books and accounts however due to an 18-year-old historic error it did not comply with its obligation and failed to realise when raised by the resident in 2017. When the landlord become aware of the service charge implication it took a resolution focused approach and investigated the matter and subsequently refunded the resident £2610.93 in overpaid service charges. The landlord’s offer of a full refund was reasonable however repaying the credit is not any sort of compensation and only rectifies the administrative error. The landlord failed to offer compensation to the for the demonstrated distress and inconvenience caused over a long period of time. Under the landlord’s compensation policy, it is able to offer financial redress including a good will gesture, it would have been approprate in this circumstance to offer the resident compensation for the acknowledged failure and to put right this part of the complaint.
The resident made a complaint in relation to a number of issues in regard to the cost and level of service charges. Although this service is unable to look at the cost and level of service charges it can investigate if the landlord responded in line with its obligations under the lease agreement. Under section 4(C) of the lease agreement if there is a dispute in regard to the accounts at the property ‘the matter shall be referred to an arbitrator (who shall not be a member of the council) appointed by agreement between the two parties and cost split equally’. There is no evidence that the landlord sought external arbitration or raised the option with the resident in order to come to a resolution of the problem in line with its obligations under the lease agreement. Accordingly, the landlord did not take reasonable steps in line with its obligations under the lease agreement which lead to a potential missed opportunity or possibility of resolving the dispute.
During the investigation of the resident’s complaint it is acknowledged by the landlord there were a number of service delivery failures including the quality of response to the resident and queries going unanswered. The landlord appropriately apologised for these failures and took a resolution focused approach and agreed to investigate the service delivery failures in this matter in order to learn from its mistakes. The landlord also appropriately offered the resident £100 compensation for these acknowledged failures. The landlord’s offer of compensation and apology was reasonable and proportionate to its communication failures however it is not enough to compensate for the distress and inconvenience caused by the substantive failure or its failure to consider arbitration therefore additional compensation is required.

The issuing of arrears letters and invoices by the landlord.

The resident made a complaint that she continued to receive incorrect invoices and arrears letter in regard to the service charge account despite contention and email agreements on adjusted amounts. The landlord apologised for the distress caused and highlighted that a note had been placed on the residents file however it was unable to put a hold on the system generated letters. The landlord had a right under its service charge policy to issue the letters however it should have taken approprate action to ensure that the incorrect invoices, some which ‘threatened court action’ against the resident, were not issued whilst the residents accounts were being adjusted. The landlord’s failure to stop the letters caused distress and inconvenience to the resident and the landlord should have offered the resident compensation to put the error right.

The landlord’s complaint handling.

The landlord operates a two-stage complaints policy, if the resident made a complaint at the first stage the landlord should formally respond within 20 working days. The documentation provided shows the initial complaint by the resident was made on 22 October 2019 and the landlord supplying a formal response on 22 November 2019, this represents a two working day delay however given the large quantity of documents that required reviewing in order to provide a response it was a minor failure.
The resident asked for a review of the decision on the 29 November 2019 and the landlord progressed the complaint and provided its final stage two review on 9 January 2020. This represents a 4-working day delay in the landlord providing the resident with its stage two response. The landlord appropriately alerted the resident about the delay in line with its complaints policy. The small delay at stage one and two of the process was not a significant failure due to the number of years covered in the complaint and the large amount of documentation associated. The landlord also appropriately communicated with the resident throughout the process.

Determination (decision)

In accordance with paragraph 54 of the Housing Ombudsman Scheme there was service failure in respect of:
1. The administration of the service charge at the property and the amount of compensation offered.
2. The issuing of arrears letters and invoices by the landlord.
In accordance with paragraph 54 of the Housing Ombudsman Scheme there was no maladministration in respect of the landlord’s complaints handling.

Reasons

The landlord failed in its obligation under the lease agreement to keep proper records which lead to the overcharging of the resident. Once the issue was raised by the resident the landlord refunded the overpaid service charge fees going back to 2014 however it failed to offer financial redress for the acknowledged failure. The landlord appropriately offered the resident £100 compensation and an apology which was reasonable and proportionate to put right the communication failures however it is not enough to compensate for the distress and inconvenience caused by the substantive failure or its failure to consider arbitration.
The landlord failed to cease the sending of letters and invoices chasing incorrect and disputed payment from the resident. The landlord should have taken approprate steps to ensure that the letters ceased during the disputed period and this failure to do so caused distress and inconvenience to the resident.
Although there were small delays at stage one and two of the complaint processes and were minor in nature due to the number of years covered in the resident’s complaint and the large amount of documentation associated. The landlord also appropriately communicated with the resident throughout the process.

Orders and recommendations

The Ombudsman orders the landlord to pay the resident compensation of £350 compromising:
1. £100 previously offered by the landlord for communications failures.
2. £50 in respect of the distress and inconvenience experienced by the resident in relation to the issuing of arrears letters and invoices by the landlord.
3. £200 in respect of the distress and inconvenience caused by the administrative failure.
This amount replaces the £100 compensation previously offered by the landlord.
The landlord is to consult with the resident regarding the appointment of an external arbitrator in line with the lease agreement.
The landlord is to make this payment to the resident within four weeks and to update this service when payment has been made.

Recommendations

The landlord is to take steps to ensure that this issue is not currently affecting other properties under the same lease.
The landlord is to put systems in place to ensure that residents are not receiving arrears letters and invoices when there are accepted errors and challenges to the account.