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Newlon Housing Trust (202309695)

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REPORT

COMPLAINT 202309695

Newlon Housing Trust

3 July 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

  1. The complaint is about the landlord’s handling of the resident’s queries about an increase in rent and service charges.

Background

  1. The resident is a shared ownership leaseholder of the landlord under a lease dated 24 September 2020. He resides at the property with his partner as a joint leaseholder. The property is a 2-bedroom first floor flat in a block.
  2. On 20 February 2023, the landlord sent a service charge variation notice to the resident informing him of an increase in service charges for the following year. It also notified him that the rent would be increased by 7% in line with the retail price index, which was lower than the amount it was entitled to increase it by based on the terms of the lease. The resident emailed the landlord on 2 March 2023 to ask for clarification on:
    1. The reason for the increase in buildings insurance contribution
    2. How projected costs were calculated, and when any overpayment would be returned to them if the figures were based on inflation.
    3. What the rent and service charge increase would have been if not capped at 7%.
    4. Whether these figures were likely to be revised, as he had previously received incorrect estimates which were later corrected.
    5. Whether the landlord foresaw the rent increasing every year.
    6. He expressed his concern at the yearly increases in both rent and service charges, given the brief time he had lived at the property.
  3. The resident sent additional emails to the landlord on 18 March 2023 and 3 April 2023 to chase a response. On 5 April 2023 he also contacted the landlord by phone but was informed that he could not be transferred to the team dealing with service charges. An email was sent internally to request it contact the resident. Following this call, he emailed the landlord to express his dissatisfaction with the landlord’s lack of response to his queries. He stated that he felt ignored and felt that he was not receiving a service which would justify the increase in charges. He also said that he had received an automatic response to his original email to advise that he would receive a response within 28 days, and this had not happened.
  4. The resident made a complaint on 13 April 2023 as he had not received a response to any of his previous communications, and he had been told over the phone that a case had been raised for him on 5 April 2023. The landlord acknowledged the complaint the same day and stated that a response would be issued within 10 working days.
  5. The landlord contacted the resident on 28 April 2023 with a response to the query which was originally made on 2 March 2023. It apologised for the delay and stated that it had “a very small team and have had an extremely high volume of queries in relation to the 23-24 service charge estimate increases.” It explained that:
    1. The buildings insurance increase was caused by an increase in the premium. This had been explained by the insurer as resulting from cost inflation, global events including the Ukraine war and Brexit, and previous claims at the property.
    2. The building insurer had a 3-year contract with the landlord which began in 2021. It said that it could begin the tendering process again to find a new insurer when this contract ended, but it was not believed that another provider would offer a cheaper premium.
    3. Its service charges were variable and therefore were linked to inflation. It provided a service charge estimate each year, and then at year end it would provide a statement of accounts. On this statement, it would highlight any over or under payments based on the actual costs incurred and this would then be accounted for on the following years estimate.
    4. The rent increase was capped at the level of the retail price index (RPI) which was 7%, but this did not apply to service charges as they were variable.
    5. It stated that it empathised with the resident given the cost-of-living crisis, however reiterated that wider issues such as economic crises and supply chain disruption and materials shortages caused by Brexit were out of its control.
  6. A stage 1 complaint response was provided by email on the same day, and the landlord apologised for the delay in response. It confirmed that the service charge team had responded to his query, although admitted that this was outside of its usual timescales. It advised that it had taken on board the learnings from the identified service failures and apologised for any inconvenience. A goodwill gesture of a £25 voucher was offered as compensation for the service delays.
  7. On 1 May 2023, the resident requested that the complaint be escalated to stage 2 of the complaints process as he felt that his original service charge queries had not been answered. In addition, he stated that while the landlord said it would learn from the mistakes made, it did not specify how it would improve its processes.
  8. The same day, the resident responded to the service charge team to ask for more clarification on the following items on the estimated service charge statement:
    1. Communal cleaning
    2. Communal television
    3. Communal heating
    4. Deficit
  9. He also asked for clarification on whether refunds would be automatically calculated based on the previous years’ service charges, and for a breakdown of any refunds he was owed.
  10. On 2 May 2023, the landlord acknowledged receipt of the escalation request email and asked the resident to confirm whether he accepted the stage 1 compensation. He confirmed that he did not accept it. He was also informed that the staff member dealing with his service charge query was on leave, and he would receive a response the following week.
  11. A stage 2 formal acknowledgement was issued on 9 May 2023 advising that a final response would be sent to the resident by 6 June 2023. On 23 May 2023, the resident contacted the service charge team to chase a response to his queries from 1 May 2023.
  12. The landlord issued a final complaint response on 5 June 2023, in which it found that more clarity should have been given to the resident around why the service failure had occurred. It reiterated that the service charge team was small and had been inundated with enquiries. It also acknowledged that there had been failures in communication from the repairs team regarding follow up work from previously reported break-ins, and this had been highlighted with the relevant team for improvement. The landlord stated that it would explore ways in which the service charge team could manage a larger number of enquiries to minimise delays in the future. An additional £25 compensation voucher was offered, bringing the total to £50 across the complaint.
  13. On 6 June 2023, the resident asked the landlord when the changes proposed in the final complaint response would be implemented, as he was still awaiting a response to his email from 1 May 2023. Further discussions between the landlord and resident the same day show that the resident confirmed he was not happy to accept the compensation. The landlord provided a response to the resident’s query from May 2023 stating the following:
    1. Cleaning costs were for internal and external areas including stairways, landings, car parks, service roads and windows. These were estimated and the true figure would be shown on the statement of accounts at the end of the year.
    2. Television costs were for the maintenance, servicing, and repair costs for the communal television aerial. This was an estimate and the true figure would be shown on the statement of accounts at the end of the year.
    3. Heating costs covered the service and maintenance of communal heating. This was an estimate and the true figure would be shown on the statement of accounts at the end of the year.
    4. The deficit amount has accrued as the amount paid towards service charges by all residents for the last year was less than the actual amount spent. Where the residents are liable for additional costs the landlord would spread this over 12 months.
    5. It was reviewing the final accounts from 2021-2022 and suspected that refunds would be due as residents may have overpaid on some elements of the service charge. Letters would be sent to residents to confirm this.
  14. The resident responded on 8 June 2023 to confirm his understanding that the service charges for 2023-2024 were estimates, and that the final amounts would be confirmed in a statement of accounts at the end of the period. He queried whether the deficit amount listed was due to a miscalculation and said he did not understand how residents could be in deficits but also be owed refunds. He also expressed concern at the level of service charge increase since moving to the property and said that some other residents were struggling to remortgage due to the service charges.
  15. On 11 June 2023 he emailed the landlord again to say that the communication had not improved, and the previous emails did not indicate how the landlord planned to address the failures, instead “tried to justify” them. He said he was having similar issues with the repairs team and felt frustrated as he was only receiving faster responses when he contacted the complaints team. He confirmed again that he did not wish to accept the compensation and was planning to approach the Ombudsman.
  16. The landlord responded on 12 June 2023 explaining that the service charge estimate was made up of the contract costs, coupled with a predicted average of any responsive repairs. The deficit was identified from the 2021-2022 statement of accounts once the actual costs of services had been confirmed. It had concluded that some jobs had been invoiced incorrectly and this had triggered the review, which it believed would result in refunds to the residents’ rent account. It committed to a meeting between itself and the resident to go over the following year’s draft service charge estimates so he would understand how the figure was calculated.
  17. The resident remains unhappy with the landlord’s response to his queries, in particular the delays in responses and the lack of clarity.

Assessment and findings

  1. Paragraph 42 (d) of the Housing Ombudsman Scheme, states that the Ombudsman will not consider complaints concerning the level of rent or service charge, or the amount of a rent or service charge increase. If a resident wishes to challenge the amount of their service charge and seek recovery, they may do so by making an application to the First Tier Tribunal (Property Chamber) (FTT). Further information about the FTT can be found by visiting GOV.UK and searching for First-tier Tribunal (Property Chamber).
  2. This investigation will focus on the landlord’s communication around service charge increases, and its handling of the resident’s complaint regarding delays in communication.
  3. In the Ombudsman’s opinion the original notice of estimated service charges did clearly show how the service charge was calculated, and what items it covered. It would be reasonable however for the resident to want further clarification on what the communal items covered, particularly for items which were also paid for privately such as heating and aerials.
  4. The rent cap at 7% was lower than the amount that the landlord could have charged under the lease. Whilst it was positive that it had capped rent at a lower level, it was not made clear on the letter what the actual saving was for each resident. It simply stated that it could have increased the rent by a larger amount as permitted by the lease. This Service has seen the resident’s lease agreement, and it is not written in an easily understandable manner. While the resident will have had a solicitor at time of purchase, the rent increase calculations are not a set percentage, and would need to be calculated yearly. It was appropriate for the resident to contact the landlord for clarification on this, and his query was never responded to. An order will therefore be made at the end of this report for the landlord to provide the resident with the requested information clearly and in plain English.
  5. The landlord’s service charge policy states “All queries regarding service charges should initially be internally reviewed, aiming to respond within the 2-10 target and if complex then it will be 28 days as often 3rd parties are involved and where appropriate any adjustments on account should be carried out.” The landlord sent a response to the resident’s service charge query 40 working days after it was submitted. While the response to his further query was within the 28-day guide, his query relating to the rent increase cap was not answered.
  6. The compensation of £50 offered by the landlord did follow its guidelines of £25 per service failure. However, its policy does allow for additional discretionary compensation for things such as:
    1. Incorrectly addressing correspondence (to cause offence/upset, but not a breach of data protection requirements).
    2. The impact experienced by the complainant could include distress and inconvenience, time and trouble, disappointment, loss of confidence, and delays in getting matters resolved.
  7. On both the stage 1 response and the stage 2 escalation confirmation emails, the resident’s name was spelled incorrectly but in different ways and the resident had to correct the landlord on the correct spelling of his name. While this was an error in proof reading by the landlord, in the Ombudsman’s opinion it gives the impression that the response was rushed and that due care may not have been given to the query. In addition, the resident was required to chase the landlord for a response to his query on multiple occasions, and one of his queries has still not been responded to. The Ombudsman finds that additional compensation for inconvenience, time and trouble should have been offered to the resident to account for these errors. An order for additional compensation will be added to the end of this report.
  8. The stage 1 complaint response listed the resident’s required outcome as “an explanation for the delays receiving a response” however no explanation was given in this response. At stage 2, the landlord indicated that the original complaint form did not request an explanation for delays so this was why one was not given. This conflicts with the stage 1 response, which clearly recognises that the resident’s complaint was specifically around delays and that an explanation was requested as a resolution. On several occasions the landlord cited “being a small team who had been inundated with inquiries following and in relation to 23-24 service charge estimate increases” as the reason for delays in service. While this may have been the case, if this is an issue which is likely to recur on a yearly basis, the landlord should proactively assess its practices to ensure it has adequate provision to respond to enquiries within a reasonable timescale.
  9. In the landlord’s communication from 6 June 2023, clear explanations were provided of what was covered in the communal items. However, the mention of refunds to the resident’s account was confusing, when coupled with the fact that there was a deficit from the previous year which the resident had to pay for in the new year. The landlord stated that there may be refunds or surpluses for individual items once the actual charges were calculated, however it was not sufficiently clear whether this would impact the resident’s payment for the upcoming year or whether it would be accounted for on the following year’s estimated charges. An order will be made at the end of this report for this to be explained to the resident.
  10. The landlord’s offer to hold a meeting with its residents to discuss the following year’s draft service charge estimates was positive and is in line with the Ombudsman’s dispute resolution principles of “be fair, put it right and learn from outcomes.” While such meetings may require extra time to be allocated by the landlord, it would go a long way to rebuilding trust between the landlord and its residents and give the residents an open forum to ask questions. This in turn could lessen the strain on correspondence teams who deal with service charge queries once the draft charges are communicated and improve its response time.
  11. Although the landlord did take some positive actions, overall, the Ombudsman finds that there was maladministration in the landlord’s handling of the resident’s queries relating to rent and service charge increase. One of the questions asked by the resident in his original communication remains unanswered and was never referenced in any subsequent correspondence. In addition, the landlord addressed him incorrectly on 2 separate occasions with 2 different misspellings of his name. This demonstrated a lack of care when communicating with the resident and could have caused him additional upset or frustration. Although the landlord explained delays and offered a modest amount of compensation, it did not provide any commitment to try and improve its service delivery in the future.

Determination

  1. In accordance with paragraph 52 of the Housing Ombudsman Scheme, there was maladministration in the landlord’s handling of the resident’s queries about an increase in rent and service charges.

Orders

  1. The Ombudsman makes the following orders:
    1. Within 4 weeks the landlord must:
      1. Pay the resident £150 compensation, to include the £50 already offered during the complaints process. This is made up of £100 for the failure to effectively answer the resident’s queries relating to the rent increase and £50 for its communication failures including addressing the resident incorrectly. Proof of payment should be sent to the Ombudsman within 4 weeks of this report.
      2. Confirm to the resident how much the rent increase would have been if it had increased in line with the lease. It should also provide the resident with a clear explanation of how the permitted rent increase in his lease is calculated. A copy of this communication should be sent to the Ombudsman within 4 weeks of this report.
      3. Contact the resident to explain its process in relation to refunds when actual charges for items were lower than expected. It should include clarity on whether the resident can access the money or whether it would remain on his account. A copy of this communication should be sent to the Ombudsman within 4 weeks of this report.
  2. The landlord should confirm compliance, with evidence, with the above orders to the Housing Ombudsman Service within 4 weeks of this report.

Recommendations

  1. The Ombudsman makes the following recommendations:
    1. If it has not already done so, the landlord should honour its commitment to holding a meeting with the resident to discuss service charge increases prior to when they are next calculated. The landlord should provide the Ombudsman with evidence of this offer being communicated to the resident with an estimated date within the next 4 weeks.
    2. The landlord should assess its practices to ensure that there is sufficient cover for resident queries during predicted busy periods, such as after service charge estimates are sent to residents. It should ensure that any timescales for contact provided to residents are realistic, and any expected delays are clearly communicated in order to manage expectations.
  2. The landlord should notify the Ombudsman of its intentions regarding these recommendations within four weeks of this report.