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Notting Hill Housing Trust (202004323)

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REPORT

COMPLAINT 202004323

Notting Hill Housing Trust

21 December 2020


Our approach

  1. 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 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.
  2. 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 resident complains about a number of errors in his service charge account and lack of information on how cleaning and gardening contracts were quoted and awarded.

Background and summary of events

  1. On 7 April 2020 the resident wrote to the landlord on behalf the Residents’ Association (RA) with a formal complaint about service charges, having already been in touch with the Property Management Officer (PMO) in previous months with his concerns. The letter included complaints about poor communication, steep increases, lack of transparency and attention to detail, a failure to include VAT on some elements, and various other numerical errors in the service charge spreadsheet. In particular, the resident raised concerns about the amounts for gardening and cleaning, which had increased by 283% & 242% respectively. The resident requested the formal quote and signed agreements for the gardening and cleaning contracts, and asked that in future any financial calculations relating to service charges be sense checked by the finance department.
  2. The landlord provided a stage 1 response on 23 April 2020. In this it apologised for some failings in communication, and acknowledged that it had overlooked VAT on some of the service charge elements. This was corrected in the final figures and had no bearing on actual costs. In relation to the request for checks by the finance department the landlord said “The responsibility of setting service charge budgets falls with the PMO of a scheme as they have the best knowledge of site requirements. Budgets are sense checked by our Performance Manager and PMOs are asked to review any that have increased/decreased over 15%. They are then uploaded by Finance Officers in the Service Charge Team who will also flag any obvious errors.”
  3. In relation to the resident’s request that the cleaning and gardening quotes for the scheme were reduced, the landlord explained that the gardening contractor had been unable to do so, as on visiting the site some areas were identified that were not included in the original quote. The landlord explained “The site was not complete when the original gardening quote was provided, which is why these areas were missed.” However, the cleaning contractor did agree to revise the cleaning quote for the scheme, which had resulted in a significant reduction in cleaning costs. The landlord was not able to amend the service charges following the start of a financial year, but any surpluses would be rebated at year-end.
  4. In response to the request for clarity on the procurement process for cleaning and gardening contracts the landlord stated that the current contractors were appointed under an existing Qualifying Long-Term Agreement (QLTA) from 2012. The landlord acknowledged that the resident had requested the signed agreements, but there were none specific to the scheme. It said “New schemes can be added to these contracts on the same terms...It is not our procedure to procure new contracts for a development each year. We find that procurement on a wider scale offers cost and time savings, as well as consistency across our schemes.” It would however be providing copies of the QLTAs for the current contractors, which it said should provide the level of detail required.
  5. The resident replied on 24 April 2020, agreeing that the VAT error had no bearing on actual costs, but stating that nevertheless this was a serious oversight on an important financial document, and such oversights could have serious implications for residents. While he was pleased that a +/-15% sense check was carried out, he said he failed to see how some of the charges for 2020/21 passed this. The resident explained “All of these errors in important documents impacts our confidence in NHG’s ability to manage this development…”
  6. The resident felt that the landlord had provided no evidence to support its comments about the gardening, and pointed out that he had asked for the original quote and contract. The resident was pleased that the cost of cleaning had reduced by £2,713, although felt that had the sense checks been applied correctly this could have been caught sooner, and residents wouldn’t have to wait until September 2021 for the rebate.
  7. The landlord provided a provisional response on 27 April 2020 (stating that a fuller response would be sent once all the information requested was available). It said that it would not be amending service charges at this point in the financial year but any surplus or deficit would be managed in the usual way once final accounts were produced.
  8. The landlord sent a stage 2 response dated 11 June 2020. In relation to the complaint about a lack of information on when and how the original quotes were received for the cleaning and gardening contracts, and what the decision to retain those contracts was based on, the landlord acknowledged that there had been a substantial increase on the original 2019/20 quotes. It said that this was because an oversight meant that the original costing had been set lower than it should have been, and it was doing its best to ensure this did not happen again.
  9. The landlord provided detail on how the gardening and cleaning costs had been arrived at, acknowledged errors with this and agreed that greater care should have been taken when providing the estimates on both contracts. It said that revision of the estimates had led to an overall annual reduction of £2,713.00. It said “…we do uphold this element of your complaint and will ensure that this is appropriately administered in the 2021/22 estimates.” It explained that it was not able to amend the residents’ service charges part-way through the financial year, but any surplus would be rebated with the final accounts.
  10. In relation to the request for information on the quotes it had received for gardening and cleaning, it said that because the contracts were based on a quote received from a comparable site, it was unable to provide the resident with one specific to the scheme. It explained that the QLTA which was used to originally put both contracts in place was formulated in 2012 and had been used on numerous New Build schemes since. It offered sincere apologies for the inconvenience caused. The landlord said a new QLTA would be actioned for the 2021/22 service charge year
  11. The landlord also acknowledged a further error that the resident had raised, with the gardening estimate based on a 12-month rotation, when this should have been 10 months. Any surplus would be retuned with the end of year accounts.
  12. The landlord offered further apologies for the inconvenience and confusion caused. It said “We acknowledge there has been poor quality in the estimating of our service charge costs, with several issues being raised by the RA as well as our internal review as a result of the complaint made.”
  13. The resident responded on 15 June 2020. He explained that while he was pleased that the landlord had acknowledged all of the financial errors, these errors had a financial impact on residents and it was not enough to simply say this would not happen again. He said “…there should be better systems in place to ensure the process is accurate and robust, and it should not be the responsibility of the residents to check the figures for errors.” The resident requested clarification on several points, which included:
    1.        He had asked for the 15% sense check be applied to line level, and asked whether the landlord could commit to doing so.
    2.        Whether the increase in gardening & cleaning costs would now be limited to inflationary increases for future years.
    3.        He noted that there was still no evidence of when the gardening and cleaning was originally quoted, and said that being part of a QLTA over seven years old was less than ideal.
  14. The resident said that due to the number of human errors made residents would feel more reassured if someone with financial training was responsible for the service charge spreadsheet.
  15. The landlord wrote back that same day explaining that even if the 15% sense check been applied to each line of the scheme’s accounts it would have returned the same result, and the accounts would not have been amended. In light of this it could not commit to performing a 15% sense check on individual lines.
  16. Neither could it say that all future increases in gardening and cleaning costs would be in line with the inflation rate. A schedule of costs as well as details of acceptable increases would be provided with the QLTA for the 2021/22 service charge year and would be available to all residents to view and submit their observations on. The landlord was therefore unable to provide a definitive response without first reviewing the schedule of costs and any applicable additional charges.
  17. In relation to the request for evidence of when the gardening and cleaning was originally quoted, the landlord explained that the this was based on the QLTA carried out in 2012. The gardening and cleaning contract was based on another development of a comparable size. Due to this, no individual quote for the development was provided. The landlord agreed that this was not ideal and said that when it began the QLTA for the 2021/22 service charge year, its aim was to have a minimum of three contractors submit a tender for each contract, although it could not commit to the exact number as it would be dependent on the number of contractors who put themselves forward. All residents would be able to access the associated documents.
  18. The landlord acknowledged that had the cleaning and gardening contractors attended the site prior to providing their quotes, the errors that had occurred could have been avoided. It said “We would like to extend our sincere apologies on this and would hope that you will remain open to us performing better.”
  19. Finally, the landlord stated that while it was always looking for new ways to improve, the service charge accounts were a key role managed by the PMOs. It said “Whilst I do agree and understand there has been an element of human error, which has had an adverse affect on our residents…this is not systematic of our everyday approach and or management of our service charge accounts.” It said that it was therefore unable to agree to the finance team being fully involved in the service charge process. However, it had recently made available to all PMOs biweekly service charge account sessions, during which they were able to raise queries and gain knowledge from the Performance Manager and more experienced PMOs. In addition, it had added an extra line of support for those who may need it, in the form of senior staff members within the department.

Assessment and findings

  1. The Ombudsman asked the landlord to provide copies of the complaint file on this case, to include the original complaint, any subsequent escalation requests, the landlord’s responses at all stages, and any other relevant documentation. The landlord has not been able to provide any of this information, citing high turnover on the leasehold team as the possible reason.
  2. The Ombudsman considers this a failing on the part of the landlord, which should keep accurate records of complaints. This is not only so that it is able to provide information to the Ombudsman should matters be escalated, but also so that it can satisfy itself that complaints have been recorded and dealt with appropriately. Complaints contain important information that landlords can utilise to assist in identifying areas for improvement and systemic problems.
  3. Further, a lack of complaint records can be a serious hindrance to the Ombudsman’s investigations. Fortunately, in this case the resident himself has provided copies of complaint correspondence.
  4. The Ombudsman understands that the resident is satisfied that the landlord has accepted the errors it made with the administration of the service charge account and has taken steps to remedy these. However, he does not feel that it has done enough to fully resolve his concerns. As a resolution to the complaint, he would like the landlord to:
    1.        apply the 15% sense check to all line items of the service charge
    2.        cap increases on services like gardening and cleaning to inflation
    3.        ensure three quotes are obtained for all services 
    1.        justify how contracts for cleaning and gardening were quoted and awarded
    1.        expedite refunds to residents within 2 months of the end of the service charge year
    2.        pay a financial penalty for any impropriety.
  5. When investigating complaints, the Ombudsman applies its Dispute Resolution Principles. These are high level good practice guidance developed from the Ombudsman’s experience of resolving disputes, for use by everyone involved in the complaints process. There are three principles driving effective dispute resolution: be fair – treat people fairly and follow fair processes; put things right, and learn from outcomes.
  6. As is set out in the resident’s leasehold agreement, the landlord must calculate the estimated service charge before the beginning of each account year, and should take all reasonable measures to ensure that these charges are accurate and provide value to money for residents. There have been several failures in the landlord carrying out its obligations in this respect, which the Ombudsman understands were only picked up when identified by the resident/RA. It is understandable that the resident has been frustrated and worried about this, and is looking for reassurance that it won’t happen again.
  7. These errors have meant that the estimated service charge he has been liable to pay is higher than it should have been, and these costs won’t be rebated until the actual accounts are finalised at year end. It is clear that the resident has expended much time and energy on identifying and pursuing the errors, as well as his subsequent formal complaint to the landlord. In addition, the errors have impacted the resident’s confidence in the administration of the service charge account. The Ombudsman is therefore satisfied that the landlord’s failings have had an adverse affect on the resident, which required action to ‘put things right’. The Ombudsman also expects to see the landlord taking learning from the complaint to improve services in the future.
  8. The Ombudsman is satisfied that the landlord did take steps to put right the errors identified, for example by addressing the VAT issue and obtaining a revised cleaning quote with a reduction of £2,713. It had also implemented service charge account sessions for PMOs, and an extra line of senior staff support. In its letters of 23 April, and 11 and 15 June 2020 the landlord acknowledged that it had made mistakes and that it should have taken more care, and explained how these errors had happened. It upheld the resident’s complaints and apologised for the inconvenience and confusion that the resident had been caused.
  9. This demonstrates that the landlord took the resident’s concerns seriously and has taken some action to try and prevent future recurrences of errors such as those identified by the resident. It explained why it could not agree to capping increases at inflation, and while this Service appreciates the frustration the resident feels at having to wait until year end to be rebated, it is not unreasonable for the landlord to provide the rebate once the accounts had been finalised, given the possibility of credit/debit in the actual amount. 
  10. However, the Ombudsman does not consider that the staff training that has been implemented goes far enough to provide reassurance that the mistakes in this case will not be repeated. For example, it is not clear whether staff training alone would address why the 15% sense check did not pick up the large increase in the cleaning costs. The landlord stated in its response that it would ensure that the 2021/22 estimates would be appropriately administered but has not given details on how it will achieve this. Neither has a remedy been provided for the time and trouble the failings caused the resident.
  11. Further, as stated above, it is a concern that the landlord has no record of this complaint, which indicates that valuable learning may have been lost.
  12. The Ombudsman notes that an additional error in the 2019/20 service charge account has come to light since the landlord issued is stage 2 complaint response, which no doubt has further impacted the resident’s confidence in the landlord’s administration of this.
  13. Finally, the resident requested details of the gardening and cleaning quotes. The landlord stated in its response that because the contracts were based on a quote received from a comparable site in 2012, it was unable to provide the resident with one specific to the scheme. While this explains why there are no quotes that are specific to the resident’s scheme, it does not explain why the 2012 quote could not be provided as he had requested. As he noted in his 15 June 2020 email, the landlord had provided no evidence of the original quotes. The landlord has not addressed this point.

Conclusion

  1. The landlord has clearly taken this matter seriously and has amended the errors that the resident identified. However, there is insufficient evidence that it has taken enough action to ‘put things right’ and ‘learn from outcomes’, and therefore this Service finds that further action is required to resolve the matter.
  2. The Ombudsman notes that the resident has provided a list of outcomes he seeks: while the Ombudsman will consider a resident’s sought resolution to their complaint, ultimately it is for this Service to decide the appropriate remedy and make orders accordingly.

Determination (decision)

  1. In accordance with paragraph 54 of the Scheme there was service failure by the landlord in respect of this complaint.

Orders

  1. The landlord should:
    1.        pay the resident £150 as a remedy to the time and trouble he was caused by the failings identified
    2.        carry out a case review to determine how each error was made in this case, what steps have been put in place to address these, and whether further action is required to mitigate the risk of these being repeated (and if so, what this action will be). A copy of the review should be sent to the resident and the Ombudsman.
    3.        provide the 2012 quote details as requested, or if this information is unavailable, explain why.

Recommendations

40.4           The landlord should review its complaint record keeping.