Leeds City Council (202401413)

REPORT

COMPLAINT 202401413

Leeds City Council

14 April 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 the landlord’s response to the resident’s concerns over its handling of service charges.

Background

2. The resident was a leaseholder under an agreement dated 2017. The landlord is a local authority. The landlord does not hold information on the vulnerabilities of former leaseholders.
3. The resident paid his service charge and ground rent by monthly standing order. The landlord prepared annual estimated charges which it sent to the resident between the financial year 2020/2021 and the financial year 2023/2024.
4. The resident sold the property to the landlord in December 2023. He was informed that he owed £766.26 in unpaid service charges, and this would be deducted from the agreed sale price. The landlord did not accept the resident’s request to pay this amount via instalments.
5. The resident complained to the landlord on 11 December 2023. He said:
   1. he had paid his service charge and had never missed a payment.
   2. the landlord had not made him aware that he owed money or was underpaying for nearly 3 years. He had never received any arrears letters.
   3. he had contacted the landlord when he became aware of the situation.
   4. the service he had received from the landlord was not satisfactory.
6. The landlord responded on 19 December 2023. It defined the complaint and said:
   1. it posted invoices and end of year statements with actual charges (as opposed to estimates) to the resident’s address.
   2. from 1 April 2020 to 2 December 2023 the charges were not paid in full.
   3. all outstanding arrears must be paid at the point any property is sold. It could not offer payment plans to former leaseholders.
   4. it apologised that this was not clarified during the resident’s call with the landlord on 8 December 2023 and that it had changed processes to ensure this did not happen again.
7. The resident made a stage 2 complaint on 20 December 2023. He said he would like a refund of £766.26 and a formal apology for the mental distress incurred. He said he was still not satisfied because:
   1. he had paid service charges up to date and matching the quoted amount for 3 years. The landlord had admitted the situation was caused by its failure to notify him of the arrears.
   2. he could not have known the account was in arrears because the annual actual statements were never shared with him.
8. The landlord gave its stage 2 response on 8 January 2024. It defined the complaint and said:
   1. it had notified the resident of the actual service charges due.
   2. it was not clear why the resident was not aware that the payments he was making did not meet the full cost of service charge payable.
9. The resident asked this Service to investigate on 7 April 2024 as he was not satisfied with the landlord’s response. He said he wanted to be refunded the money taken at the point of completion and an apology for the stress he had experienced.

Assessment and findings

The landlord’s response to the resident’s concerns over its handling of service charges

10. The leaseholder guide stated the service charge is made by the landlord for services it provides to the property under the terms of the lease, this includes direct services and management costs.
11. The leaseholder agreement states the resident is responsible for paying the service charge. The leaseholder guide states that an annual service charge estimate statement will be generated in April. At the end of the financial year, the landlord will identify actual expenditure it has incurred for that year. This may be more or less than the estimate. Within 6 months, all leaseholders should receive an actual service charge statement.
12. Residents are required to pay the service charge account within 21 days of receiving it. This can be paid by standing order monthly.
13. The resident said that he received a copy of the quarterly estimated invoices from the landlord. Between 3 April 2020 and 1 December 2023 the resident paid £59.27 monthly to the landlord by standing order. This amount was less than the required amount to pay the total annual estimated charges. The resident was responsible for paying the total estimated amount and for checking that his payments reflected this. The landlord notified the resident of the estimated annual charges, and this was in line with the leaseholder agreement.
14. The landlord provided the actual amount service charge notices to this Service. These notices were addressed to the resident:
    1. Financial year 2020/2021 dated 1 October 2021.
    2. Financial year 2021/2022 dated 1 October 2022.
    3. Financial year 2022/2023 dated 1 October 2023.

The resident states that he did not receive these. Based on the documentary evidence available, it is not possible to assess why the resident may not have received the actual amount service charge notices.

15. The leaseholder guide states that residents should not ignore any reminders which are sent to them. It also states that the council will begin court proceedings against leaseholders to recover service charge monies due. The resident has complained that he did not receive any arrears notifications between 2020 and 2023.
16. The landlord did not contact the resident to inform them that he was in arrears with his service charge account, nor to remind him that his standing order should cover the total estimated amount. The leaseholder guide does not say that the landlord will always send reminders, but it does imply that the landlord has a system in place for this.
17. The Ombudsman’s insight report on service charges (which is available on our website) recommends that landlords consider whether the information about the service charges is in clear and simple language and can be understood by the ordinary person with no specialist service charge knowledge. It would have been reasonable for the landlord to contact the resident to inform him of the debt and to try to recover his arrears.
18. However, the terms of the lease obligates the resident to pay the service charge. Therefore, it was the resident’s responsibility to ensure that he was aware of the actual and estimated service charges and that his payments reflected these costs.
19. In summary:
    1. the resident was informed of the estimated annual service charge. The monthly amount he paid by standing order was not sufficient to cover this cost. It was the resident’s responsibility to ensure that he paid the full estimated charge.
    2. it is not possible to assess why the resident may not have received the actual service charge notices.
    3. the landlord did not inform the resident nor attempt to recover his arrears prior to the sale completion. It would have been reasonable to inform the resident that he was in arrears prior to completion. However, it was the resident’s responsibility to ensure that he was paying the estimated service charge costs.
20. While the landlord notified the resident about the arrears at the point of completion, it would have been beneficial to notify him of the arrears as they built up between 2020 and 2023. The landlord could have also informed the resident that it intended to recover the arrears from the agreed sale price prior to the date of completion. Based on the above communication issues, the Ombudsman has found service failure in the landlord’s handling of this element of the complaint.
21. In line with our remedies guidance, the landlord is ordered to pay the resident £50 for the distress caused by its communication failures.

Determination

22. In accordance with paragraph 52 of the Scheme, there was service failure in the landlord’s response to the resident’s concerns over its handling of service charges.

Orders

23. Within 28 days of this report, the landlord is ordered to:
    1. apologise in writing to the resident for the service failures identified in this report.
    2. pay the resident £50 compensation for the distress caused by the delay in notification of the arrears.

Documentary evidence of compliance with these orders should be sent to this Service within 28 days.