Orbit Group Limited (202226908)

REPORT

COMPLAINT 202226908

Orbit Group Limited

3 April 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

The complaint is about:
1. The landlord’s handling of the resident’s staircasing application and its response to her request for reimbursement of costs incurred, including those arising from an increase in the valuation due to delays in the staircasing process.
2. The landlord’s complaint handling including payment of the compensation awarded.

Background and summary of events

The resident is a shared owner of the landlord. The property is a 2-bedroom, second floor flat. The lease commenced on 9 December 2016 when the resident purchased an initial 75% share in the property. The developer is named on the lease.
The landlord’s Homeownership procedure states:
1. “Usually when you have lived in your home for a certain length of time, as the shared owner, you can buy more shares in your property, enabling you to own a greater proportion of your home. This is known as staircasing. The greater the share you buy in your home, the less rent you will pay to Orbit.”
2. “The cost is calculated on the full open market value of the property, e.g. if your property is valued at £200,000 and you want to buy an extra 25% share, the purchase price of the extra share would be 25% of the valuation, i.e. £50,000.”
3. “Additional shares in the property can be acquired at a price equal to the relevant proportion of the current full open market value of the property, e.g. if the property is valued at £200,000 and they want to buy an extra 25% share, the purchase price of the extra share would be 25% of the valuation, i.e. £50,000. Eligible shared owners may increase equity in their property by purchasing further shares in tranches of 10% or more.”
4. Applicants must submit an Intention to Staircase form, a valuation completed by a Royal Institute of Chartered Surveyors (RICs) qualified valuer and the administration fee.
The lease states that “at any time after the fifth anniversary of the grant of this Lease the Leaseholder may serve notice in writing on the Landlord stating that he wishes to acquire the Unacquired Percentage.” The landlord should then apply to the Valuer to determine the market value of the property within 14 days then advise the resident within 7 days of receipt of the determination. The resident may pay for the unacquired percentage within 3 months of the Valuer’s determination. The lease states that “as the landlord holds a long lease of the Premises only and not the Freehold, the lease is an underlease by reference; however, when the Leaseholder owns 100% he or she can acquired the Head Lease for no charge.”
With regards to acquiring the Head Lease the resident’s lease states that “At any time the leaseholder shall have the right on giving notice to the Landlord to acquire the Head Lease provided that such notice shall not take effect before the acquired percentage has become 100% and until all sums payable to the Landlord …”
The landlord has a two stage complaint procedure. At the time of the resident’s complaint the procedure in effect at the time stated that the landlord should acknowledge stage 1 complaints within 5 working days, investigate and respond within 10 working days. If this is not possible it should inform the complainant within the 10 working days when the response will be sent.
In September 2022 the landlord updated its complaints procedure. This stated that the landlord should acknowledge Stage 2 complaints within 5 working days of receipt and send the response within 20 working days of receipt. If it is unable to respond within 20 working days, it should contact the resident to advise when it expects to be able to respond to the review request.
The landlord’s Compensation Procedure states “We may award compensation if the standard of service we provide is considerably below the standard customers could reasonably expect. We will decide whether to pay this compensation. We will only pay it if the customer has experienced financial loss or significant distress or inconvenience.” The landlord’s Compensation Guidelines document states that it may make payments of up to £400 in recognition of time, distress and inconvenience where there has been “high effort, high impact”. It may make a payment of up to £150 in respect poor complaint handling.

Summary of Events

On 19 August 2021, the landlord, in response to an enquiry by the resident, provided details of the procedure for buying extra shares in the property. It advised that valuations were taken as lasting for 3 months and should be valid at the time of completion.
On 18 October 2021 the resident sent an application to staircase, purchasing the remaining 25% share, with a valuation. On 1 and 16 November 2021 the landlord advised the resident’s solicitor that the resident was not eligible to staircase at that time, nor could it start the process until she had owned the property for 5 years.
In correspondence during December 2021 the resident’s solicitor confirmed she wanted to proceed with the staircasing. On 24 December 2021 the landlord advised the valuation provided, which was dated 20 September 2021, had expired and it needed an up to date one.
When the valuation of the resident’s property was extended on 4 January 2022, the valuer confirmed the same property valuation and the same amount to purchase a 25% share in the property.
The resident re–applied on 5 January 2022 then sent the correct Intention to Staircase form on 10 January 2022. The landlord instructed its solicitors on 8 February 2022 with the deadline for completion set for 3 April 2022.
In an exchange of correspondence between the respective parties’ solicitors between 7 and 23 February 2022 the resident’s solicitor sought an update on the staircasing documents as the resident’s mortgage offer was expiring. It also noted that as part of the final staircasing the Head Lease title should be transferred to the resident.. The landlord’s solicitor provided a draft transfer. It stated that it had written to the developer to confirm that the Head Lease title in favour of the developer would be removed by its solicitor prior to completion. It also advised it had written to the council to request the release of a legal charge relating to a section 106 agreement, which relates to planning obligations.
The information provided to the Service indicates that the landlord’s solicitor wrote to the developer’s solicitor 7 times between 23 February 2022 and 29 June 2022 regarding the restriction on the Head Lease title in favour of the developer. The landlord’s solicitor also wrote to the council 7 times between 23 February 2023 and 8 July 2023 about the charge related to the section 106 agreement.
Within this period, on 1 April 2022, the developer’s solicitor confirmed its fee to remove the restriction of the Head Lease title. On 26 April 2022, the landlord agreed with its solicitor to pay the developer’s solicitor’s charge and also the council’s charge.
During this period the resident’s solicitor wrote several times to the landlord’s solicitor for an update but received no response. On 11 May 2022 the resident’s solicitor wrote directly to the landlord about outstanding enquiries, in particular, the restriction on the Head Lease title which prevented it from registering the title in the resident’s name.
On 27 June 2022 the resident complained that she had been trying to buy the remaining 25% for her property since December 2021; however, this had been held up because information requested several times over the last few months by her solicitor was not provided. During these six months, the Bank of England base rate had increased significantly and she was now having to get another mortgage extension. She requested details of the landlord’s complaint procedure and for all documentation by 5 July 2022.
On 29 June 2022 the landlord advised the resident “Unfortunately, there aren’t any outstanding documents for Orbit to provide. I contacted [the landlord’s solicitor] yesterday for an update on the case, they advised there are restrictions on the title and they are experiencing delays with permissions from the developer to get this removed. I have asked them to liaise with your solicitor directly. They assured me they have been emailing the developer weekly and have tried to call them a few times this week but haven’t been able to get through.”
Despite previously accepting that it should pay, the landlord continued to dispute the council’s charge and on 29 June 2022 the council’s solicitor advised the council would seek to recover its charge whether or not the resident completed her purchase. On 4 July 2022 the developer’s solicitor confirmed it consented for the restriction to be removed.
On 7 July 2022 the landlord asked the resident for an extension on the valuation which expired the following day. On 15 July 2022, the resident’s solicitor sent an extension on the valuation which showed a £20,000 increase meaning that the resident would have to pay another £5,000 to obtain a 25% share. Over the weekend, on 17 July 2022, the resident wrote to the landlord to follow up on her complaint of 27 June 2022, stating that she may lose her mortgage offer and have to take on a higher interest mortgage. However, on 18 July 2022 the resident’s solicitor confirmed the resident wanted to complete on the following day. The landlord’s records indicate that the staircasing transaction completed on 19 July 2022.
On 29 July 2022 the resident provided details of costs incurred:
1. surveyor’s revaluation fee – £60.00.
2. additional staircasing percentage from original to new valuation – £5,000.
3. additional stamp duty / land registry payment due to revaluation – £40.
4. change of mortgage rate – 5 year 1.22% at £446/month to 5 year at 1.74% for £475.06/month – additional £29.06 per month, £348.72 per year and £1743.60 over the five years of the mortgage.
5. increased interest rate and redemption value on a building society mortgage in moving to a new mortgage with another lender.
On 2 August 2022 the landlord sent the stage 1 response:
1. It found that it had instructed its solicitors within a month but there were complications with the title deed and removal of charges. It took time to receive a new valuation. There was also a charge from the council that it needed to pay and which it tried to have removed. There were also charges with the developer that had to be adjusted and removed.
2. It noted the mutual exchange process usually took 3-4 months. In this case the resident’s competition date was confirmed as 19 July 2022.
3. It agreed to pay the resident’s revaluation fee of £60.00, the additional stamp duty / land registry payment due to the revaluation of £40.00, and a payment of £123.00 for the total time it took for completion. (The internal case notes indicate that this was calculated as £1 per day over the timeframe for staircasing.)
4. It awarded a further £400.00 for the distress and inconvenience caused by the service failing and delayed process exceeding 3 months.
5. It also noted that it had offered to refund 50% of the resident’s additional staircasing percentage from the original supplied to the latest valuation, a total of £2,500.
The landlord had also spoken to the resident on 2 August 2022 to explain the outcome of the complaint. Having noted that the resident was dissatisfied and did not accept its compensation offer, in the letter of 2 Augst 2022 it advised that it would be escalating the complaint. Its notes state that the resident was unhappy as she had additional expense of over £7,000 but would only be getting half of this back.
On 28 September 2022 the resident emailed the landlord pursuing payment of the compensation offered at stage 1 and also seeking an update on her escalated complaint. She also requested that the landlord pay her the compensation it offered in the interim event though she thought it was insufficient.
On 21 November 2022, 16 December 2022, 20 December 2022 and 13 February 2022, the resident sent further emails chasing up the response to her escalated complaint and the payment of the compensation offered at stage 1. After the email of 20 December 2022, the landlord noted the complaint had not been escalated to stage 2 and did so the same day.
On 31 March 2023 the landlord sent the stage 2 response to the complaint, outlining the action it took on the staircasing application. It stated:
1. the delays in the staircasing were outside of its control.
2. had the resident’s solicitor consulted with it before the original valuation was carried out it would have confirmed that it was not possible to staircase at that time, therefore the valuation could have been valid for longer. It was not responsible for the need for a valuation extension therefore did not accept responsibility for covering the fee.
3. the resident had agreed the new valuation before it had the chance to respond. It had received notification of a £5,000 increase for the share in the property late on a Friday afternoon, then notification on the next working day (Monday) that the resident had accepted the valuation.
4. it did not uphold the complaint and apologised if the resident felt it did not act in a timely manner. It would offer a further £50 compensation to reflect the delays in responding to the Stage 2 complaint.
The landlord also noted that the resident was unhappy that she had not received the compensation offered at Stage 1. It advised that she should sign and return a compensation form.
The resident has advised the Service that the landlord paid the compensation into her account in June/July without advising her beforehand or checking receipt.

Assessment and findings

The landlord’s handling of the resident’s staircasing application and its response to her request for reimbursement of costs incurred, including those arising from an increase in the valuation due to delays in the staircasing process

The initial valuation was obtained too early insofar as it expired around 2 weeks after the resident became eligible to staircase and before the landlord received the correct Intention to Staircase form. The landlord cannot therefore be held responsible for the need for the resident to obtain a revaluation in January 2022. According to the documents provided to this Service, the revaluation of the property was the same therefore the resident did not incur an increased cost to purchase the remaining equity in her property at this point.
After receiving the correct forms from the resident, the original date set for completion was appropriate as it was the last date the valuation of 4 January 2022 would be valid. The Ombudsman would expect that when a landlord receives a staircasing application, it would have procedures to progress the matter without unnecessary delays. If any unexpected delays have occurred, the landlord would be expected to minimise these as much as possible and keep the resident informed about what has happened, the action it has taken or would take to resolve, and whether the original timeframe for completion could still be met.
Ultimately, it took around 6 months following the resident’s application for the staircasing to complete. The delay in the staircasing was largely attributable to the time taken for the developer’s solicitor to consent for the restriction on the head lease title to be removed so the interest in the estate could be transferred from the landlord to the resident. The Ombudsman considers that the landlord had a responsibility regarding the consent. This is because there was no contractual relationship between the developer and the resident.
There were delays in the landlord’s handling of the staircasing, unrelated to the developer’s solicitor. It was unreasonable that the landlord’s solicitor did not initially write to the developer’s solicitor until 23 February 2022 as a month had already passed since the resident’s application and revaluation. It also took the landlord over 3 weeks, from 1 April 2022 to 23 April 2022 to confirm it would pay the developer’s solicitor’s and council charges. There was also a delay in resolving the charge from the council.
Once a few months passed, the landlord with its solicitor should have intensified its efforts, especially after it was apparent the original completion date of 4 April 2022 could not be met. There is no evidence that the landlord’s solicitor emailed the developer’s solicitor weekly as stated in the landlord’s email of 29 June 2022 or that the landlord proactively pursued updates with its solicitor. Overall, there was as lack of urgency on the part of the landlord.
The landlord with its solicitor also did not maintain regular contact with the resident or her solicitor, even if it had no substantial updates to provide. The resident’s perception of shortcomings in the landlord’s service, in combination with the landlord’s lack of clarity and transparency, caused her distress and anxiety over a protracted period of uncertainty. Although the landlord did not have absolute control over the entire process, it could have mitigated a significant amount of the resident’s distress by being open about the delay.
The landlord’s delays indicates that there are shortcomings in the landlord’s processes. The delay in obtaining consent to remove the restriction indicates that its working relationship with the developer can be improved, in particular with regard to making the transfer of title more smooth. The landlord does not have a clear position on who should pay the council’s charge when a leaseholder staircases to 100%, or even whether it accepts such a charge should be paid. It is also not evident that the landlord has a process for chasing its solicitor when there are delays in staircasing or for providing the leaseholder with updates. Recommendations have been made on these matters.
In identifying whether there has been maladministration the Ombudsman considers both the events which initially prompted a complaint and the landlord’s response to those events through the operation of its complaints procedure. The extent to which a landlord has recognised and addressed any shortcomings and the appropriateness of any steps taken to offer redress are therefore as relevant as the original mistake or service failure. The Ombudsman will not make a finding of maladministration where the landlord has fully acknowledged any failings and taken reasonable steps to resolve them.
In this case, the landlord reimbursed specific costs incurred by the resident from the delay in staircasing, specifically a revaluation fee and additional stamp duty / land registry fee. It also offered compensation for the delay in the staircasing and the resident’s distress and inconvenience totalling £523. This award was proportionate to the circumstances of the case given that ultimately it was reliant on the developer’s solicitor and because the award was in line with its compensation policy. It also exercised its discretion by offering to meet half the added cost the resident had to pay to staircase after the latest valuation when it was not obliged to do so. This totalled £2,500. Taken together the landlord’s offer of redress constituted reasonable redress which satisfactorily resolved the complaint.
This finding does not mean the Ombudsman thinks the staircasing issue, the landlord’s handling or impact on the resident was ‘reasonable.’ The finding reflects that there were failings by the landlord, which its compensation offer acknowledges and compensates for in line with the Ombudsman’s approach. Whilst this is the case, this investigation has made some recommendations in recognition of identified service issues.
The Service acknowledges that the resident considers the landlord’s offer or compensation to be insufficient as it does not cover the full increase in the cost of staircasing after the latest valuation or notional costs arising from missing out on obtaining a favourable mortgage rate. While the Service appreciates the resident’s sense of injustice, there is an inherent risk in the conveyancing process and the landlord is not responsible for changes in prevailing housing market conditions or of changes in interest rates, both of which, incidentally, can fall to the benefit of the purchaser.

Complaint handling including the payment of the compensation awarded

The resident initially submitted a complaint on 27 June 2022. Whilst the landlord responded, the resident indicated that she wished to make a complaint. Therefore, the landlord should have acknowledged the compliant request and provided a written complaint response within 10 working days as required by its complaints policy. However, it failed to do so. It only registered the resident’s complaint after she followed up on it on 17 July 2022. Ultimately the landlord delayed with dealing with the resident’s complaint at Stage 1.
The resident escalated her complaint on the same day as receiving the Stage 1 response, on 2 August 2022. This was confirmed in the Stage 1 response itself, therefore the landlord should have registered a Stage 2 complaint at that time. However, it failed to do so. The landlord had further opportunity to register a complaint after the resident sent further emails between September 2022 and 20 December 2022. It only did so after the email of 20 December 2022, which exacerbated the resident’s time and trouble in pursuing her complaint.
The fact that the resident sent several emails before the complaint was escalated indicates that the resident failed to understand the status of her complaint. It did not follow its process to ensure the complaint was properly administered and investigated.
Even after escalating the complaint, the landlord took another 3 months to respond. There was no good reason for this delay especially as the actual staircasing was completed. The landlord also did not send holding responses to resident exacerbating her distress and inconvenience. This delay indicates that the landlord lost oversight of the resident’s complaint. The Service also notes that while the landlord offered £50 compensation for the delay at stage 2, this was not proportionate to the length of the delay and the impact on the resident.
The Service’s complaint handling code in effect at the time stated that landlords must address all points raised in the complaint and provide clear reasons for any decisions. In this case, the resident specified the impact of the change in her mortgage deal. While the landlord was not responsible for meeting the notional increase in cost, it should have addressed this aspect of the resident’s complaint in its responses.
With regards the compensation offered, the resident made clear from September 2022 that she would like the landlord to pay it. As with the escalation of the complaint, when the resident sent several emails the landlord missed several opportunities to make the payment, or send a form if this was necessary. The lack of response and delay in making the payment exacerbated the resident’s distress and inconvenience and sense of being out of pocket. While the landlord acknowledged the delay in the Stage 2 response, it did not offer redress, which was unreasonable given the length of the delay and the resident’s time and trouble in pursuing payment. Furthermore, according to the resident, the landlord took a further 3 months before making the payment.
Given the failings in the landlord’s complaint handling and in the processing of the compensation payment, the Service has made on order for a case review so that lessons can be learnt.

Determination (decision)

In accordance with paragraph 55b of the Housing Ombudsman Scheme, the member has offered redress to the resident prior to investigation which, in the Ombudsman’s opinion, satisfactorily resolves her complaint about the handling of her staircasing application and its response to her request for reimbursement of costs incurred.
In accordance with paragraph 52 of the Housing Ombudsman Scheme, there was maladministration in respect of the landlord’s complaint handling, including the payment the compensation awarded.

Reasons

There were delays and failings in communication by the landlord in the handling of the resident’s staircasing application. However, in responding to the resident’s complaint it offered discretionary compensation that provided reasonable redress for its failings in service.
There were various failings in the landlord’s complaint handing including unreasonable delays at both stages of the procedure, a failure to address all aspects of the resident’s complaint and unreasonable delays in the payment of the compensation that was offered.

Orders and recommendations

Orders

The landlord is ordered to within the next 4 weeks to:
1. send an apology to the resident for the failings in service identified in this report taking into account the Service’s guidance on providing apologies.
2. pay the resident a further £300 to reflect her distress and inconvenience and time and trouble arising from its failures in the handling of her complaint and the award of compensation.
3. carry out a case review of its complaint handling with particular regard to ascertaining:
  1. why the resident’s complaint was not promptly registered.
  2. why there were delays in the responses.
  3. why emails were not answered and/or forwarded to the appropriate team.
  4. why the compensation payment was not processed in a timely way.

Recommendations

The Service recommends that the landlord, with its solicitor as necessary, reviews:
1. its working relationship with the developer and its solicitor, in particular with regard to making the transfer of title more smooth.
2. its position on who should pay the council’s charge when a leaseholder staircases to 100%, or even whether it accepts such a charge should be paid.
3. its procedure for chasing its solicitor when there are delays in staircasing.
4. its procedure for ensuring that the leaseholder and/or their solicitor is provided with updates when there a delays in staircasing.
The Service requests the landlord confirms its intentions in respect of the above recommendations within the next 4 weeks.