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Peabody Trust (202230461)

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REPORT

COMPLAINT 202230461

Peabody Trust

9 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:
    1. Response to the resident’s reports of issues with her service charge account.
    2. Handling of the associated complaint.

Background

  1. The resident is a leaseholder, and her property is a 1 bed, first floor flat. The property is a converted house with 1 flat below the resident. The landlord is the freeholder. The landlord has no vulnerabilities recorded for the resident.
  2. In July 2017 the resident’s landlord and another merged. The resident has told the Ombudsman that the issues with the service charges began after the merger.
  3. The resident is charged a variable service charge. The accounting period runs from April to March. The resident pays an ‘interim charge’ for each accounting period. She is advised of this charge in a service charge estimates letter usually in the February or March prior to the start of the accounting period. As soon as practicable after the end of the accounting period the landlord will provide the resident with a service charge actuals letter, which shows the total expenditure for that accounting period minus the interim charge that the resident has already paid. This figure is the final reconciled service charge bill for the period and will set out any excess or deficit in the resident’s service charge account.
  4. Since March 2017, the landlord has incorrectly added a service charge for a door entry system. In November 2018 the landlord acknowledged the error in the 2017/2018 accounting year and credited the resident’s account by £72. In February 2019 the door entry charge was included in the service charge estimates letter for the 2019/2020 accounting year. The resident complained to the landlord, and it removed the charge on 29 March 2019 and the accounts were correct for 2019/2020.
  5. The resident contacted the landlord in March 2020 to tell it the door entry system charge was in her service charge estimates letter for the accounting year 2020/2021. In April 2020, through their internal complaint process, landlord acknowledged the error and advised it had removed the charge from the account in time to be correct from 1 April 2020, the start of the accounting year. It did not amend the resident’s direct debit to the new amount and the resident had to ask it to do this. This did not happen until May 2020.
  6. In April 2021 the resident complained to the landlord that the door entry charge was again included in her service charge estimates letter for the accounting year 2021/2022. On 16 July 2021 the landlord sent the resident its delayed stage 1 complaint response. It told the resident that it had deleted the incorrect entry and was confident that she would not see it again going forward. The resident accepted £150 compensation for poor complaint handling and time, trouble, and inconvenience. The resident’s service charge statements show that the landlord amended the charge from August 2021 and credited the account by £65.84 in total for the 4 months it overcharged the resident.
  7. The resident saw the door entry system charge on the next service charge estimates letter in March 2022 and wrote to the landlord telling them she would be cancelling her payment until it permanently rectified the problem. The landlord replied and confirmed the charge was incorrect, that it had been removed and the new amount to pay would be £98 per month. The resident agreed she would set up her payment for that amount. The landlord said it would check each service charge estimate and service charge actuals going forward to ensure the charge was not added again.
  8. The landlord did not remove the door entry system charge from the service charge total and the resident built up arrears on her account. The landlord’s collections team contacted her about the arrears and had no knowledge of the situation. In December 2022 the resident wrote to the landlord’s chief executive officer (CEO) to express her dissatisfaction. This was not logged as a formal complaint.
  9. On 22 December 2022 the landlord replied and apologised to the resident. It said it would remove the charge and credit the overcharged amount to the account. It would also ensure that it did not include the charge in the 2023/2024 accounting year. The landlord applied a £72 credit to the account which it said was for the accounting year 2021/2022. The resident’s expectation and request had been that the current accounting year’s (2022/2023) charge would be amended, and any credit applied to her account. The 2022/2023 charges remained incorrect on the resident’s account. The 2023/2024 service charge estimates letter contained the door entry system charge.
  10. In March 2023 the resident approached the Ombudsman and was advised to go through the landlord’s internal complaint process. In the landlord’s stage 1 complaint response it acknowledged most of its errors and offered £150 compensation. It did not acknowledge that the charge had remained incorrect for the 2022/2023 accounting year. The resident asked twice to escalate to stage 2 of the complaints process.
  11. In the landlord’s stage 2 complaint response it said a revised statement had been sent to the resident. It confirmed notes had been added to the account that would flag up the issues to anyone accessing the account. It added the property to a high priority list to ensure a special focus on the account. The landlord offered a total of £650 compensation that included compensation for the delayed complaint responses.
  12. The resident remained dissatisfied with the landlord’s response and actions and brought her complaint to the Ombudsman.

Post internal complaint procedure

  1. The actuals for the accounting year 2022/2023 were produced in September 2023 and the resident received a credit to her account, that included the amount she had been charged for the door entry system.
  2. The resident did not receive a revised statement and / or service charge estimates letter for 2023/2024 and the charge for a door entry system remained. The resident paid her service charge monthly, less the amount for the door entry system.
  3. In March 2024 the resident received her 2024/2025 service charge estimates letter, and it included the door entry system.

Assessment and findings

Scope of investigation

  1. The information presented to the Ombudsman demonstrates that from 2018 the resident complained about the door entry system charge. The information further demonstrates that in November 2018, March 2019, April 2020, and July 2021, the landlord acknowledged the error and committed to rectifying it. Paragraph 42b of the Scheme affords the Ombudsman scope to consider issues bought to its attention more than 12 months after they have exhausted the member’s complaints process. This investigation will therefore consider the resident’s complaint related to service charge issues from when the resident reported it to the landlord in 2018 up to the landlord’s final complaint response of 19 May 2023. It will also investigate whether any of the actions from the complaint responses happened, if the landlord has put things right and learnt from its mistakes.
  2. The Ombudsman recognises aggravating factors when considering compensation. The relevant aggravating factor in this case is the history of mishandling by the landlord of the resident’s tenancy.
  3. It is not disputed by the landlord that the service charge for a door entry system is incorrect. It agrees with the resident that there is no door entry system at the property and there should be no charge. The Ombudsman has not determined that, it is an evidenced fact that already exists. The resident is free to apply to the first-tier tribunal if she so wishes and this investigation does not prohibit her doing so.

Response to the resident’s reports of issues with her service charge account.

  1. The landlord acknowledged it had incorrectly charged the resident for a door entry system in the accounting year 2017/2018. After sending the service charge actuals letter to the resident it credited her account by £72 on 6 November 2018. From the evidence provided as part of this complaint it is not clear which party had realised the error. However, the credit was applied in a timely manner after the actuals were produced and the landlord acted appropriately.
  2. The resident complained to the landlord in February 2019 that the service charge estimates for 2019/2020 included the door entry system. The landlord communicated well with the resident, acknowledged the error, and removed the incorrect charge in time for the start of the new accounting year. The resident praised the landlord for acting quickly. The landlord acted reasonably.
  3. However, the landlord said the action it had taken to remove the charge should stop it from appearing again. It did not and the landlord did not do enough to monitor the issue and prevent it from happening again. It did not consider the fact the charge kept re-appearing and should have adopted a long-term approach to manage the account to prevent the error occurring again. It was not learning from its mistakes.
  4. The landlord incorrectly charged a door entry system charge for the accounting year 2018/2019. Once the service charge actuals were calculated at the end of the accounting year, the landlord applied a £72 credit to the resident’s account on 11 October 2019. The landlord acted reasonably in applying the credit in a timely manner. However, this was the second year the charge had been applied incorrectly and there has been no evidence provided that the landlord took steps to stop it happening again. The landlord was not proactive or acting with professionalism, diligence and integrity, recognised core principles of service charge management within the housing sector.
  5. In March 2020 the resident complained again that she was going to be charged the door entry system charge in 2020/2021. The landlord acted quickly to remove the charge before the accounting year started. It acted reasonably in a reactive situation. However, had the landlord been proactive the charge would not have been applied at all. The landlord knew the issue, knew it had happened since 2017 and did not apply sufficient compliance checks or system changes to stop it happening each year. The landlord also failed to amend the resident’s direct debit amount, and this was not corrected until May 2020. The landlord acted unreasonably. Its actions were not thorough. It was not customer focused and the resident commented that she did not have the time to chase the landlord on a yearly basis.
  6. In April 2021 the resident complained to the landlord that the door entry system charge had been included in the 2021/2022 service charge estimates letter. The landlord sent a stage 1 complaint response on 16 July 2021. The response was delayed because the complaint had been incorrectly allocated to the wrong person. The landlord apologised and offered £50 compensation for its poor complaint handling. This was not a fair remedy. £100 would have been a fairer remedy. This would have been in line with the landlord’s compensation and remedies policy. The complaint response delay resulted in an inconvenience for the resident, who was waiting for a resolution to an error that had been repeated by the landlord since 2017.
  7. The landlord offered £100 compensation for the time, trouble, and inconvenience that the resident had incurred due to the landlord’s failings. This was not a fair remedy if the landlord had considered its past failings. The landlord’s policy also tells us it will assess an offer of compensation considering ‘the cumulative impact that a series of events or failures may have on a customer.’ It should have recognised the failing year on year to put things right. An offer of £200 compensation for time, trouble and inconvenience covering the previous year’s errors would have been appropriate and reasonable.
  8. On 30 March 2022 the landlord replied to the resident’s correspondence from 29 March 2022 and apologised that the door entry system charge kept cropping up on her account. It acknowledged that the 2022/2023 service charge estimates included the charge and confirmed it had been removed. It outlined that the total new charge would be £98 per month. The landlord offered further assurances that moving forward it would check each service charge estimate and service charge actual to ensure the charges were not added again. It offered a further apology. On the face of it all the actions within this response were reasonable. However, the landlord’s failure to follow through with any of these actions were evidence of the landlord failing to do what it said it would do and put things right. The landlord acted unreasonably.
  9. Based on the landlord’s response the resident told it she would set up a monthly payment to her service charge account for £98, which she did. The landlord did not remove the door entry system charge and the total monthly charge remained at £114.46. The resident was chased by the landlord’s collections team for the arrears that were accruing on her account and the Ombudsman has seen evidence of the landlord’s arrears letters from August, September, and November 2022. The history of what had happened on this account was not in a location where everyone working for the landlord could see it. Most systems have an option to stop automated letters. It would have been forward thinking of the landlord to contact the collections team to let them know the resident had been advised to pay £98 per month as the current charge was incorrect and was being amended. The landlord acted unreasonably in not doing so and was not customer focused or forward thinking.
  10. On 22 December 2022 the landlord replied to the resident, who was frustrated that she was receiving arrears letters and that the matter was not resolved yet. The landlord again confirmed that her property did not benefit from a door entry system and that the cost would be removed, and a credit issued ‘forthwith’. It said that it had asked the relevant team to ensure the charge line was removed and that it had already added notes to the property to ensure it did not happen in the April 2023/2024 estimates. The landord apologised. Again, the landlord’s actions appeared reasonable, but they did not happen as demonstrated by:
    1. The current charge for 2022/2023 stayed the same.
    2. The credit of £72 was for a previous year and was incorrect as the credits needed for 2021/2022 had already been applied to the account in August 2021.
    3. The estimates for 2023/2024 included the door entry system.

  The landlord acted unreasonably. It did not learn from prior mistakes and did not take any successful steps to ensure the error ceased.

  1. The landlord made a credit adjustment to the account of £72 on 20 January 2023. This was for the accounting year 2021/2022. The landlord’s response from 22 December 2022 was not clear as to what it was crediting and for what period. Given that this issue had been happening each year since 2018, it would have been reasonable for the landlord to lay out clearly how much it was crediting and what period it related to. This credit further attributed to the resident’s view that senior managers did not understand, as the errors in the account year 2021/2022 had already been amended in August 2021 and the incorrect charges adjusted for April to July 2021 resulting in a £16.46 credit for each month. The landlord acted unreasonably.
  2. On 1 March 2023 the landlord’s collections team called the resident to discuss her arrears. The resident told the landlord she was surprised by the call from the collections team as she had assumed notes had been added to the system, as per the landlord’s communication from 22 December 2022. She felt that the landlord lacked a clear understanding of the issue. The resident’s feeling can be corroborated by the fact that the 2022/2023 monthly service charge figure had not yet been amended on her account and that the landlord’s collections team could not see any notes that explained why the resident was only paying £98 per month when the system was charging £114.46. The landlord acted unreasonably in not ensuring explanation notes were present and clear on the system, and that the landlord’s email from 30 March 2022 telling the resident to pay £98 was not easily accessible.
  3. The landlord’s stage 1 complaint response of 24 March 2023 told the resident that although she had a right to challenge her charges, she did have an obligation to pay them whilst disputing the costs. While this is legally correct, the landlord had contacted the resident on 30 March 2022 telling her a new lower amount that she should pay. It was reasonable of the resident to accept this amount and amend her payment. It was the landlord’s failure to amend the charge (like it said it would) that resulted in the arrears. The landlord acted unreasonably. It was not a fair approach and may have added to the resident’s feeling that the landlord did not have a clear understanding of the issues and that the issues were not well documented on the system.
  4. The Ombudsman must first consider whether a failing on the part of the landlord occurred, and if so, whether this led to any adverse effect or detriment to the resident. If it is found that a failing did lead to an adverse effect, the investigation will then consider whether the landlord has taken enough action to ‘put things right’ and ‘learn from outcomes’. In this case the landlord failed to adequately correct its mistake and prevent it from happening again, over a period of 6 years.
  5. The landlord’s stage 1 and stage 2 complaint responses offered the following non-financial remedies for its failings:
    1. That the incorrect charge for 2023/2024 would be removed immediately. This did not happen and remained incorrect for the entire year. The resident cannot expect a credit until September 2024 when the actuals are produced.
    2. Assured steps would be taken to ensure error does not happen again. It happened again in the service charge estimates letter 2024/2025.
    3. That a revised statement would be sent to the resident. This was not sent, and it was not clear what it meant by statement.
    4. That it would add the property to a high priority list to ensure account receive special focus and increased diligence. It is unknown as to whether this happened, but the door entry system charge was present on the next years’ service charge estimates letter.
    5. The landlord acknowledged most of its errors and apologised to the resident.
  6. The landlord’s stage 1 complaint response of 24 March 2023 offered £125 compensation for time, trouble, and inconvenience. This was in line with the landlord’s compensation and remedies policy that offered £1 to £200 for minor disruption where there has been a low impact, low effort to resolve. This was not a fair remedy. The resident went to a lot of effort to try and resolve the issue, writing long, clear, detailed emails to the landlord. The landlord’s policy also tells us it will assess an offer of compensation considering ‘the cumulative impact that a series of events or failures may have on a customer.’ The Ombudsman recognises that at the time the landlord would not investigate cases older than 6 months but a recognition of its failure year on year should have been made.
  7. The landlord’s stage 2 complaint response of 19 May 2023 increased its financial remedy offer to £600 for this part of the complaint. It offered £250 for time, trouble, and inconvenience and £350 as a contribution to the cost of management, admin, charges for a period of 6 months prior to the complaint being logged. The landlord told the resident this payment would cover a significant amount of the charges.
  8. The landlord’s compensation and remedies policy says to offer £401 to £600 where a service failure has occurred resulting in either high impact, high effort to resolve and / or extended time to resolve so £600 was in keeping with this. This was an appropriate remedy at the time. Overall, a finding of reasonable redress cannot be made as the substantive issue remains. The landlord is still charging for a door entry system in its service charge estimates each year. It has either not followed through on its proposed actions or its actions have not been sufficient in preventing the issue from happening again. An order has been made in recognition of this and taking into account the aggravating factor of the landlord’s history of mishandling the resident’s account.
  9. On 27 September 2023 the resident received her service charge actuals statement for 2022/2023, and the landlord paid a credit of £299.52 onto her account. The actuals statement was not transparent and although the credit amount did include the £197.50 for the door entry system charge the letter did not detail this under the estimates (£197.50) and actuals (£0). It did not include it although it had charged it all year. The letter did not represent a transparent account of what had happened and of the landlord’s failure to remove the charge before the end of the accounting year. The Landlord and Tenant Act 1985 section 21 provides that the summary should set out the costs in a way:
    1. “… showing how they have been or will be reflected in demands for service charges and, in addition, shall summarise each of the following items, namely—(a) any of the costs in respect of which no demand for payment was received by the landlord within the period referred to…”.

This part of the act is in relation to when a resident requests a summary, however it is considered good practice for landlords to follow these guidelines whenever they produce statements of actual expenditure. The landlord acted inappropriately.

  1. In summary, the Ombudsman finds maladministration in relation to the landlord’s response to the resident’s reports of issues with her service charge account. The landlord does not dispute that the service charge estimates from 2017 were wrong. On each occasion the landlord promised to rectify the error and said it would not be repeated. It did not adhere to this promise and failed to instigate changes to prevent the door entry system charge from appearing each year. It acted reactively not proactively and for the accounting years 2022/2023 and 2023/2024 it failed to amend the charges on the account at all. In 2022 it subsequently contacted the resident and told her that her account was in arrears. The account was not in arrears, rather, the landlord had not corrected the billing issue. The landlord demonstrated a lack of understanding of the issue, especially in relation to the accounting year 2022/2023 and this had a adverse impact on the resident.

The landlord’s handling of the associated complaint

  1. The landlord defines a complaint as an expression of dissatisfaction, however made. It has adopted the definition from the Ombudsman’s Complaint Handling Code (the Code). The resident’s email to the landlord’s CEO on 5 December 2022 was an expression of dissatisfaction. It should have been logged as a formal complaint. The landlord acted inappropriately in not doing so. It delayed the resident progressing her complaint and accessing the Ombudsman’s investigation service.
  2. On 1 March 2023 the Ombudsman advised the resident she needed to go through the landlord’s internal complaints process (ICP). The landlord acknowledged the complaint on 6 March 2023, 3 working days after receiving it. The landlord acted appropriately by acknowledging it within the 5-day timescale of its complaints policy and the Code.
  3. The landlord sent the stage 1 complaint response on 24 March 2023, 14 working days after the acknowledgement. The landlord’s complaints policy and the Code have a timescale of 10 working days. This was not appropriate. However, the landlord acknowledged its delay and offered £25 compensation. This was a fair remedy for the length of the delay and in keeping with the landlord’s compensation and remedies policy of a low impact, low effort incident. The landlord offered reasonable redress.
  4. The landlord’s stage 1 complaint response failed to mention the accounting 2022/2023. This had been the main issue for the resident and the complaint was brought to the landlord in that accounting year. From the resident’s previous written correspondence, the landlord knew that she felt the landlord lacked an understanding of what the issue was. It should have called the resident prior to sending out the response. This could have prevented the complaint escalating to stage 2 if the landlord had included all the complaint information. The landlord acted unreasonably in not realising what the issues were and not making any attempts to speak to the resident to ensure its understanding. It was not customer focused.
  5. Paragraph 5.4 of the Code tells landlords that if the problem is a reoccurring issue, then it should consider any older reports as part of the background to the complaint if this will help resolve the issue for the resident. The landlord did acknowledge the problem was a reoccurring problem in its stage 1 complaint response and provided evidence from the past 5 years. The landlord acted appropriately.
  6. On 25 March 2023 the resident asked the landlord to escalate the complaint to stage 2 of the complaint process as she was not happy with the landlord’s response. This request was made within the timeframe of 10 working days detailed in the landlord’s complaint policy. The landlord replied on 31 March 2023, increasing its compensation offer. Paragraph 5.9 of the Code states that if all or parts of the complaint are not resolved to the resident’s satisfaction at stage 1 it must be progressed to stage 2. The resident clearly set out her request and explained why. The landlord should not have delayed the escalation or tried to prevent it from happening. The landlord acted inappropriately in doing so.
  7. On 1 April 2023 the resident asked again for the complaint to be escalated to stage 2. The landlord responded on 12 April 2023 acknowledging the escalation and advised the response would be delayed until 3 May 2023. On 3 May 2023 it told the resident it would not be able to respond until 18 May 2023 and on 18 May 2023 this got extended to 19 May 2023. From the date the resident first requested the escalation to stage 2 it was 36 working days until she received the final complaint response. The landlord acted inappropriately for the following reasons:
    1. The time it took to produce a response was more than the timeframes in the landlord’s complaint policy and the Code.
    2. The resident said she did not agree to the extension. Paragraph 5.14 of the Code tells us that an extension beyond 10 working days should be agreed by both parties. The landlord should have tried to speak to the resident, rather than send an email.
    3. The extension requests were made on the days the response was due. This did not demonstrate good time management of the complaint and may have caused further distress and inconvenience to the resident. It did not demonstrate good complaint handling principles to keep the resident regularly updated.
  8. One of the resident’s main points of dissatisfaction in her escalation was the landlord’s failure to address the incorrect charges for the accounting year 2022/2023. Despite the landlord’s stage 2 complaint response including this within the detail of her escalation, it did not address this issue. It offered £350 compensation for charges for 6 months prior to the complaint, which was that accounting year. However, the response was not clear on whether it recognised the issue and if the system and accounts were going to be amended. As per the Code, complaint responses should be clear and address all the points raised. The landlord acted inappropriately by not having a clear understanding of the resident’s complaint, which resulted in a less than clear complaint response.
  9. At stage 2 of the complaint process the landlord offered the resident £50 for complaint handling delays and shortcomings. The Ombudsman does not assess this as a fair remedy. The landlord stalled the stage 2 escalation and then failed to produce a response in a timely or agreed timeframe. £100 would have been a fairer remedy and in line with the landlord’s compensation and remedies policy for failure to correctly investigate a complaint resulting in inconvenience and effort to progress. In addition to this the Ombudsman has identified failings in the responses and complaint handling actions of the landlord and these are recognised in the order for compensation below.
  10. In summary, the Ombudsman finds maladministration in relation to the landlord’s handling of the associated complaint. The landlord delayed the resident’s access to the ICP and then further delayed the process with late responses to both the stage 1 and stage 2 responses. There was an overall lack of understanding of the entire complaint and no concerted efforts to try and understand it. This resulted in poor responses that may have contributed to the resident’s dissatisfaction. It also meant that the issue was not resolved and continued to happen, demonstrating a failure to ensure resolutions were followed up.

Determination

  1. In accordance with paragraph 52 of the Housing Ombudsman Scheme, there was maladministration in relation to the landlord’s response to the resident’s reports of issues with her service charge account.
  2. In accordance with paragraph 52 of the Housing Ombudsman Scheme, there was maladministration in relation to the landlord’s handling of the associated complaint.

Orders

Orders

  1. Within 4 weeks of the date of this report the landlord to apologise for the impact of its failures on the resident. This written apology must be from a member of the landlord’s senior management team.
  2. Within 4 weeks of the date of this report the landlord to pay the resident £1300, made up of:
    1. £650 offered in its stage 2 response letter if it has not already done so.
    2. £350 for the distress and inconvenience, time and trouble incurred by the resident as a result of the landlord’s failures in its response to the resident’s reports of issues with her service charge account.
    3. £300 for the distress and inconvenience, time and trouble incurred by the resident as a result of the landlord’s failures in its handling of the associated complaint.
  3. Within 4 weeks of the date of this report, a named senior member of the landlord to write to the resident committing in writing that the door entry system charge will not be included in her service charge estimates going forward and any error on account of the landlord will not result in any contact regarding her account being in deficit.
  4. Within 8 weeks of the date of this report, if not already done so, the landlord is to amend the charges for the 2024/2025 accounting year and make a credit adjustment onto the account for the months already overcharged.
  5. Within 12 weeks of the date of this report the landlord to send the resident the service charge actuals accounts for accounting year 2023/2024 and ensure that the credit for the door entry system, plus any other credit due, is paid onto the resident’s account.
  6. Within 12 weeks of the date of this report the landlord to complete a case review that considers and accounts for the failings in this case. A senior manager should conduct the review which should set out:
    1. An investigation as to why the actions to prevent the error either were not put in place or did not prevent the error from happening again.
    2. What changes the landlord will implement to ensure that communication with residents is stored, filed, logged in an accessible place for all relevant landlord staff to access.
    3. A review of the landlord training on its complaints policy and the complaints handling code, specifically in relation to recognising a complaint.
    4. That the landlord has considered if other residents were affected by its service charge setting failures.