Paragon Asra Housing Limited (202233884)

REPORT

COMPLAINT 202233884

Paragon Asra Housing Limited

30 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

The complaint is about the landlord’s handling of:
1. The resident’s requests for explanations and evidence for increases to her service charge and the status of a reserve fund.
2. The associated complaint.

Background

The resident is a shared owner of a 2-bedroom flat, which is situated in a block. She pays a proportion of rent and a service charge to her landlord. The landlord is the head leaseholder and the block is owned by a different party (the freeholder). The services for the block are managed by a third-party management company (the managing agent).
Initially, the resident’s complaint was made as a group of other affected leaseholders and later brought to the Ombudsman as an individual complaint. In this investigation, we refer to “the resident”, however, it is noted that the other leaseholders were similarly affected and/or had similar concerns. We are though only considering how the resident has been affected.
In early March 2023, the resident said that she was not satisfied that the rent statement for the 2023/24, sent 2 weeks prior, justified a 52% increase in her service charge. She asked for the landlord to provide receipts and invoices under Section 22 of the Landlord and Tenant Act 1985 (the Act). She sent further emails on 20 and 24 March 2023 stating that she had not received a response to her query, including from the complaints team. The resident advised that she would be challenging the rising costs through the First-Tier Tribunal. She also added that in 2020/21 the reserve fund went “missing” with no explanation.
The resident subsequently contacted us, and we asked the landlord to respond to her complaint on 17 July 2023. The aspects we asked it to address were about its response to the resident’s reports of an “unjustified increase” in the service charge and the lack of a reserve fund.
In the landlord’s stage 1 response, dated 8 August 2023, it acknowledged failings in its handling of the resident’s request for information and subsequent complaint. It said:
1. A monthly cap had previously been applied that was not reapplied in 2023/24.
2. There had been some costs that had not been included in previous years.
3. The Service Charge Manager had already confirmed in June 2023 that the 52% increase was in-line with the amount the managing agent had charged the landlord.
4. It was unable to address the concerns about the reserve fund because it did not have the necessary information.

The landlord advised it would continue to obtain the relevant information about the reserve fund. It also awarded compensation of £50 for its delayed response.

The resident said she was unhappy with the landlord’s response on 16 August 2023. She explained her reason was because it did not provide her with any new information or answer her question about why the service charge had increased so significantly.
On 13 October 2023 the landlord provided its stage 2 response. It said its initial response about the managing agent charges and price cap was correct. The landlord said it had considered evidence about the reserve fund and had identified that in December 2020 the way it was allocated changed. It provided records it said supported its findings, including a copy of the managing agent budget for 2022/23, accounts from a previous managing agent, and a summary of the reserve fund expenditure going back to 2015. The landlord apologised for the delayed complaint response and offered £20 compensation.
After the complaints process ended, the resident told the landlord that she did not consider that the complaint was closed because the landlord had not met its obligations under the Act to provide evidence. In its response in late October 2023, the landlord said it had provided the accounting evidence that was available. It said it did not have the 2023 accounts because the managing agent’s accounts run from the calendar year and its own were based on a financial year. It advised it would share the accounts when these were available.
The resident referred her complaint to the Ombudsman because she remains unhappy with the landlord’s responses. She said she has been caused financial difficulties because of the increases in her service charge and frustration by the handling of her complaint. The resident advised that she is seeking compensation and more evidence in the form of receipts and invoices.

Assessment and findings

Scope of investigation

Central to the resident’s complaint is her view that the cost for the service charges is unreasonable or not supported by the evidence. Challenges about the reasonableness of a service charge are made through the First Tier Property Tribunal (the Tribunal). We are unable to consider, therefore, if the service charge costs are reasonable. Similarly, the nature of the resident’s concerns about the landlord’s supporting evidence not meeting the requirements of the Act would be better raised at a Tribunal or in court. This is because a failure to comply with sections 21-23 of the Act can result in a conviction and a fine. Our investigation will assess how the landlord responded to the resident’s enquiries and her associated concerns.
The resident advised that she does not believe she receives quality services for the amount she pays. There is no evidence, that we have seen, that the resident complained about this specific issue in her original complaint. In the interest of fairness, we have limited the scope of this investigation to matters raised in her formal complaint. This is because the landlord needs a fair opportunity to investigate and respond to any reported dissatisfaction with its actions first. The resident may wish to raise a complaint with the landlord separately. This may then be referred to the Ombudsman for investigation if she remains unhappy. However, depending on her specific concerns, it may be more appropriately addressed at a Tribunal.

Communication about service charges

In December 2023 we published an insight report on service charges. While this was after the events complained about, this reflects the landlord’s obligations under the Act and best practice. We said in our report that we expect landlords to provide “clear and accessible” information service charges. This includes how they are costed and what a tenant can do to challenge charges.
We have seen that the landlord’s service charge budget statement, dated 23 February 2023, included clear and accessible information. It explained the service charge was variable and was based on an estimate of costs. It also set out a breakdown of costs that made up the service charge, the bulk of which was made up of costs incurred by the third-party managing agent. The statement advised that, after a review, the landlord had decided to increase the service charge. Importantly, the budget statement also included details about the resident’s rights. This included a right to request a written summary of the service charges and to see accounts, receipts or invoices. It also provided information about the Tribunal. These reflected the resident’s rights and the landlord’s obligations under sections 21 and 22 of the Act.
Under the Act, the landlord is required to provide information, where requested, within specific timeframes. Within 1 month of a request or 6 months of the end of the relevant period, the landlord is required to provide a summary of the costs that made up the service charge. When a resident requests to view evidence to support the service charge costs, the landlord should make facilities to allow this within 1 month.
On 7 March 2023, the resident said the increase in the service charge was “astronomical” and asked for the reason. She also asked for invoices and receipts from the managing agent dating back to 2020. When she complained via this Service in July 2023, she was unhappy that the landlord had not provided her with the information she had requested.
The landlord’s stage 1 response from August 2023, provided an explanation for the increase in costs. It included a table as a comparator of the costs between the current and previous years with and without the cap. This was relevant information and was set out in an understandable format. Although we were not provided with a copy of its response, other evidence supports that the landlord had already given some of this information in June 2023. It therefore did, in our view, provide information as it was obligated to do. The time it took, however, at around 3 months was inappropriate. The landlord did not acknowledge any failings in its handling of this.
The landlord confirmed that the service charge costs for 2023/24 had been checked by it and were correct. However, there was no mention in the initial response to the resident’s request to see copies of supporting evidence. We have also seen no reference in any of the earlier communications with the resident. As explained, the landlord had a duty to respond to the resident’s request for evidence. It was also in-line with the Ombudsman’s Complaint Handling Code (the Code), which sets out good practice for handling complaints, to address all aspects of a complaint. The landlord did not appropriately respond to the resident’s request and her subsequent complaint about it.
The resident had also enquired about a “missing” reserve fund. According to the lease agreement, the resident is required to pay “an appropriate amount” towards a reserve fund, although this amount is not defined. It states this is intended to cover costs that are likely to arise after the end of the account year.
In the stage 1 response, the landlord explained that it had not been able to obtain the relevant information from the managing agent. In cases where there is a separate freeholder or managing agent, as is the case here, we expect the landlord to make requests for information on behalf of its residents. It was appropriate then that the landlord was attempting to obtain the information the resident had requested. We cannot say how proactive the landlord was in pursuing this because we have not seen such records. Nevertheless, it was reasonable for the landlord to acknowledge the delay and that it had not been able to address her complaint.
The landlord has not demonstrated that it did everything it may do to facilitate the resident’s request for evidence. In our insight report, we said that we expect landlords to provide residents with contact details of the freeholder and/or managing agents. This is so they can pursue evidence directly with them, should they wish to. We have seen no evidence that the landlord shared or considered sharing the contact details in this case. We have therefore recommended that it consider doing so.
The landlord’s complaints policy stated that it would consider a complaint resolved when it had, in some cases, delivered a service within a specific timeframe. This approach is in-line with the Code, which expects remedies to be followed through to completion and within a defined timescale.
The landlord confirmed it would continue to attempt to obtain the information it needed from the managing agent. However, it would have been appropriate, given how long the resident had been waiting, to provide an expected timescale. As explained, the landlord had timescales it was required to respond within. It should have, at a minimum, explained what information it was seeking from the managing agent and the timescales it was required to respond within. Therefore, the landlord did not take sufficient steps to attempt to address and put right the resident’s complaint.
The resident escalated her complaint in mid-August 2023 because she said the landlord had not provided any more information than it had previously. She was also unhappy that 5 months had passed since her original query. A further 2 months on, the stage 2 response from mid-October 2023 provided some more information than previously shared. It explained the difference in the capped percentage increases for the previous 2 years. It also included a summary of the service charges paid over the last 5 years and the managing agent’s 2023 budget for the costs of running the estate. While the landlord tried to provide more explanations for the increase in the service charge, and shared some evidence, it again failed to address the resident’s specific request to see receipts and invoices. It therefore did not respond appropriately in-line with its obligations.
In terms of the reserve fund, the landlord explained that from 31 December 2020 the managing agent at the time transferred the balance into 2 funds. These were reserves for costs for the block and the estate. It also included a summary dating back to 2015. The explanations and evidence appear to be reasonable and consistent with our expectations to be clear and accessible. The resident also provided no specific challenge to or reason for us to question the information the landlord provided. We are therefore satisfied that it responded to this aspect appropriately.
After the complaint process ended, the resident repeated in several emails that she believed the landlord had not addressed her requests for information. In its response on 26 October 2023 the landlord advised that it did not have the accounts for 2023 because they had not been finalised. According to the lease, the landlord will determine and certify the actual expenditure “as soon as practicable” after the end of the account year (31 March). The landlord said in its email that the managing agents account year ended at the end of a calendar year (30 December). Prior to this, in September 2023, the landlord had sent a notice under section 20b of the Act. This advised the resident that it did not yet have a final actual spend for the 2022 to 2023 financial year. There is no reason, that we have seen, that the landlord could not have provided an explanation about the relevance of this to the resident’s complaint in the complaint response. It was inappropriate to provide it after the process had ended.
Even so, the landlord has not provided a clear response to the resident’s request to view receipts and invoices. For example, we do not know if the landlord believes that the certified account statement satisfies its obligations under section 22 of the Act. If this is the case, the landlord should state this.
Overall, the landlord has failed to:
1. Respond promptly to the resident’s queries.
2. Provide all information about the service charge in an easy-to-understand format.
3. Communicate effectively with the resident about how it handled her requests for information and the relevant timescales.
In view of the above, the Ombudsman makes a finding of maladministration and orders it to take actions to put right the distress and inconvenience caused to the resident.

Associated complaint

The landlord has a 2-stage formal complaints policy, which aligns with the standards set in the Code. It distinguishes between a request for the landlord to do something (a service request) and an expression of dissatisfaction (a complaint). Although the resident was unhappy with the increase in her service charge, her initial contact in early March 2023 was, in our view, a request for the landlord to follow the required process set out in the statement letter. It was reasonable not to initially deal with this as a formal complaint.
We have seen that the resident complained in an email from 20 March 2023 that she had not received any meaningful response to her request. It was apparent from this that she was not just unhappy with the service charge, but with how the landlord was handling her concerns about it. The landlord should have escalated a complaint at this point. It was a failing that it did not follow its process and the Code.
At stage 1 the policy states it will respond within a maximum of 15 working–days (5 working-days to acknowledge a complaint and a subsequent 10 working-days to respond to it). It took the landlord around 97 working-days to respond. Therefore, it significantly exceeded its timescale.
The landlord recognised in its initial response that the complaint response had been delayed. It also awarded compensation of £50. According to its compensation policy at the time, this amount was within the range it could award for failings with a “medium” impact where it has not addressed a problem “within a reasonable timescale.” It is also within the range, albeit at the lower end, of the Ombudsman’s guidance on remedies recommends for impacts that are not expected to be long lasting.
The resident made it clear on 16 August 2023 that she was not satisfied that the landlord had made reasonable attempts to address her complaint. Under its policy and the Code, the landlord was required to provide a stage 2 response within 20 working–days. If more time is needed, the policy states the timescale may be extended by up to 10 working-days. In such cases, the landlord will write to the resident to let them know. There is no evidence, that we have seen, that the landlord advised the resident the final response would be delayed. Rather, we have seen that the resident only received an update in late September 2023 after she pursued it. It took the landlord almost double its published timescale to respond. This and its poor communication with the resident were a failing.
While the landlord has apologised and offered compensation, which it increased to £70 at stage 2, these are not proportionate to the impact of its repeated failings. We have therefore made a finding of service failure and have ordered the landlord to pay compensation above its original award.

Determination

In accordance with paragraph 52 of the Housing Ombudsman Scheme (the Scheme), there was maladministration in the landlord’s handling of the resident’s requests for explanations and evidence for increases to her service charge and the status of a reserve fund.
In accordance with paragraph 52 of the Scheme there was service failure in the landlord’s handling of the associated complaint.

Orders

Within 4 weeks of this report the landlord is to show the Ombudsman evidence that it has completed the following actions:
1. Apologise to the resident for the repeated communication failures.
2. Pay the resident £300 compensation, made up of:
  1. £200 for the communication failings relating to the service charge.
  2. £100 for the delays in the complaints process.

If the landlord has already paid the compensation of £70 offered during the complaints processes, this may be deducted, leaving £230 to pay.

Respond to the resident’s section 22 request to see evidence in a clear and accessible way. It should explain if it believes it has already supplied evidence that meets its obligations and why.

Recommendations

In February 2024, the landlord implemented a service charge policy. It is good practice in the social housing sector for landlords to have a defined policy. This includes a section about how the landlord deals with challenges about service charges. The landlord is encouraged to, if it has not already, make its leaseholders aware of its policy. It is also asked to consider specifying its service level agreement timescales are so that residents are clear about what they should expect.
The landlord should consider providing the resident with the contact details for the managing agent and/or freeholder.