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Shepherds Bush Housing Association Limited (202319440)

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REPORT

COMPLAINT 202319440

Shepherds Bush Housing Association Limited

28 February 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

  1. The complaint is about the information provided to the resident by the landlord regarding service charges.

Background

  1. The resident is a shared owner and holds an underlease with the landlord (a housing association). She lives in a 1-bedroom ground floor flat. The landlord and the freeholder have a headlease, and the freeholder engages its own management agent.
  2. The resident bought her share in the property in July 2021. In February 2022 the resident contacted the landlord as she had received a letter of arrears due to services charges added onto the account in January 2022, the arrears totalled £2,348.46. On 20 January 2023 the resident raised a formal complaint, she said:
    1. No information was provided by the landlord about service charges when she bought the property.
    2. At the end of 2021 the landlord told her service charges would be collected monthly and would be £201.63. However, this was incorrect.
    3. The landlord told her that the only resolution it could offer was to ensure it would show the correct service charges on sales information in the future.
    4. That she had to wait months for a response to her concerns about service charges, only for the landlord to say there had been an internal error and there was nothing further it could do.
  3. The landlord responded at stage 1 of its complaint process on 16 February 2023. It said that:
    1. The external service charge was not something that it had a say over and so could not reduce or reimburse these charges.
    2. The information quoted by the landlord was their own management charges as the external charges did not show on its internal systems.
    3. When the resident was sold the property, she should have been advised there was an external management company in place. This would have been noted on the LPE1 pack and the resident’s solicitor had the opportunity to raise enquiries.
    4. It did fail to respond to the resident’s communication in December 2022 and therefore, £50 compensation would be offered. This was broken down as £25 for the failure to respond to 2 emails and £25 for the time and trouble this caused.
  4. The resident escalated her complaint on 2 March 2023. She repeated her concerns that the landlord had misrepresented the service charges when she was buying the property, and that incorrect information had been provided by the landlord about these charges. The landlord provided its stage 2 complaint response on 29 March 2023. It said that no new information or evidence had been provided, so the stage 1 response was upheld.
  5. The complaint was referred by the resident in September 2023. To resolve the complaint, she said that the landlord should pay the difference between the service charge advertised and what she had been charged. She wanted this to cover 5 years as a minimum calculating this to be £12,000. In addition, she would like the landlord to pay £16,000 compensation to cover loss of earnings, her time and trouble, and the distress and inconvenience caused. Finally, she wanted the landlord to waive the fees to sell on her home and ensure all charges were transparent for selling properties in the future.

Assessment and findings

Scope of complaint

  1. The Ombudsman understands the resident is unhappy, in part, with the level and reasonableness of the service charges. While we can look at the information provided by the landlord, we are unable to determine complaints about the level or reasonableness of a charge. Complaints that relate to the level, reasonableness, or liability to pay rent or service charges are within the jurisdiction of the First Tier Tribunal. The resident may wish to seek further advice on this issue from the Leasehold Advisory Service or First Tier Tribunal.
  2. The resident has also asked us to consider if the landlord should make a payment for her loss of earnings. While we are an alternative to the courts, we are unable to establish legal liability or calculate an award for damages. These matters are likely better suited to consideration by a court.

Information about service charges

  1. As part of the conveyancing process for leasehold properties it is normal for a LPE1 form to be completed which includes a specific section on service charges. As part of these enquiries the last 3 years of published service charge accounts are provided, as well as estimates for future service charges. In this case, the management agent completed the LPE1 form during the conveyancing process and provided attachments showing the service charge accounts to the resident’s solicitor.
  2. The Law Society Conveyancing Protocol published in 2019 says that a solicitor acting for a buyer should consider the lease and advise as necessary on the service charges payable. This includes making enquiries to ensure it has the necessary information to provide a full picture of what is being charged. Therefore, the onus was on the resident’s solicitor to ensure that the resident was clear on the level and amount of service charges she would pay during the conveyancing process.
  3. However, before the resident completed the purchase of the property, the landlord issued an acceptance letter on 6 January 2021 and a memorandum of sale dated 1 February 2021. In these documents the landlord listed monthly charges as:
    1. £167.96 for its rent.
    2. £28.80 for its management fee.
    3. £160 for “external service charges”.
  4. The landlord has provided service charge accounts for the period 6 months prior to the resident’s purchase of the property. The external charges added to the account in the 6 months prior to the resident’s purchase of the property were:
    1. A standard service charge of £928.88. Which was to cover the cost of maintenance and repairs to the exterior, structure, and shared areas of the building.
    2. The reserve fund charge of £543.34. Which was a contribution made to cover the cost of major or cyclical works.
    3. An estate service charge of £349.71. Which was to fund the cost of maintaining communal areas of the estate such as private roads, green areas, and lighting.
    4. A car parking charge of around £220.
  5. The above 6 monthly external charges were in addition to the landlord’s rent and management fee.
  6. Therefore, the figure given by the landlord prior to the sale was incorrect. The resident was told by the landlord that the monthly external service charge would be £160. However, the actual level of external charges was closer to £340 per month, around a 112% increase. The landlord has not provided any reasons for this.
  7. The Ombudsman understands there can be variances in the fees and the external charges were not set by the landlord. However, the Capital Funding Guide requires that shared ownership homes are affordable for residents. Where they are not, this could lead to financial difficulties or loss of their home. As such, the estimate of service charge set out in marketing material and any pre-contract information should be clear and not misleading to allow a potential buyer to make an informed choice about whether the purchase is affordable. In this case, the information was not correct and therefore, there is maladministration.
  8. The landlord’s service charge policy says it will, “provide a clear approach about how service charges are calculated, applied, communicated to residents and consulted upon where required.” But we have set out below how the landlord’s actions following the resident’s purchase of the property did not meet this goal.
  9. After the resident bought the property in July 2021, she contacted the landlord in January 2022 to ask about the services charges for her property. The landlord responded on 25 January 2022 and advised:
    1. The current monthly service charge until 31 March 2022 was £201.63.
    2. That it had looked at the charges on the earlier owner’s account and found that the external management company invoices the landlord every 6 months. The £201.63 charge splits the total annual cost over a 12-month period.
    3. That the next lot of charges for December 2021 to June 2022 were:
      1. £1,742 for the reserve fund and standard service charge combined.
      2. £366.55 for the estate service charge.
      3. £221.03 for a car park space charge.
  10. The resident asked the landlord on 30 January 2022 to clarify if the £201.63 charge was monthly or annually. The landlord responded the same day and said that the charge was monthly but would change on 1 April 2022 when the resident would be notified of the new charges.
  11. The detail provided by the landlord about the service charge in January 2022 was incorrect. While the landlord said that there would be 6 monthly charges added to the account, it did not recognise that these charges were separate to the £201.63. Which was its own charge for rent and administration.
  12. This incorrect information caused the resident some significant inconvenience and distress as she received a letter in February 2022 stating arrears on her account of £2,348.46. This amount was mainly made up of the 6 monthly external charges totalling £2,329.58.
  13. On 21 February 2022 the resident contacted the landlord about the arrears letter. She explained that she was not informed of this charge and that the charges on her account seemed a lot higher than the monthly charge confirmed by the landlord of £201.63. She asked the landlord to confirm how much the service charge should be, requested the dates the charges were due and how the account was in arrears.
  14. The landlord has been unable to show it sent the requested information to the resident. The Ombudsman spotlight report on leasehold, shared ownership, and new builds from September 2020, emphasises the importance of providing accurate information when asked. By not providing clear and transparent information on service charges the resident’s distress continued to increase.
  15. The resident made another request about the service charge on 8 September 2022. She said that the amount being charged seemed to be a mistake or that the landlord had misrepresented the service charge amount during the sales process. This request shows that the landlord had failed to provide clear and transparent details about the service charges for 7 months following her first request. This was unreasonable and continued to cause distress and inconvenience to the resident.
  16. The resident asked for a breakdown of the service charges again on 16 September 2022. She wanted the landlord to set out how it calculated the figure of £160 that was on the memorandum of sale as this amount differed to what she was now being charged. The resident chased the landlord for an update on:
    1. 2, 12 and 26 October 2022
    2. 1 and 23 November 2022
    3. 6 and 14 December 2022
    4. 16 January 2023.
  17. The landlord responded 3 times on 4 and 12 October 2022, and 7 November 2022 before it provided its final reply on 19 January 2023. In its response the landlord said:
    1. There had been an internal error with external service charges on its internal system.
    2. During the sales process the management agent sent the LPE1 form to the resident’s solicitor, this included the last 3 years of service charge accounts.
    3. The solicitor had an opportunity at this point to verify and ensure all information relating to the sale was correct.
  18. The time taken by the landlord to provide a response to the resident’s requests of 8 and 16 September 2022 was unreasonable. The landlord took nearly 4 months to provide the resident with a full response to her concerns about the service charges. When it did reply, it did not provide any clear information on how the service charges were calculated or what future charges were likely to be. The failure to do this continued to have a significant impact on the resident and increase the distress and inconvenience caused.
  19. On 20 January 2023 the resident raised a formal complaint about the service charge information the landlord had provided. In its complaint response dated 16 February 2023, the landlord said that when it replied to the resident in January 2022 it quoted its own charges as any external management fees were not on its system.
  20. However, the explanation in the complaint response was not correct. The landlord did have the information about the 6 monthly external charges available as it set these out in its email dated 25 January 2022. The failure to respond accurately to the resident’s complaint caused her further frustration and inconvenience.
  21. In addition, its stage 1 complaint response did not provide any clear or transparent information on what the current service charges were, nor did it provide any breakdown of the charges on the resident’s account. This was a further missed opportunity to provide clarity to the resident and resulted in an escalation of her complaint on 2 March 2023. This caused the resident some time and trouble to chase for this information and increased the distress and inconvenience she already felt.
  22. In her complaint escalation the resident asked the landlord to provide a calculation of the £160 figure sent with the memorandum of sale, and details on why the current service charge was higher than this figure. The landlord responded on 29 March 2023 to say that the resident had provided nothing new and therefore, its stage 1 complaint response was upheld.
  23. However, the landlord failed to provide clear, transparent, and easy to consume information on the service charges. Nor did it provide any clarity on how the £160 figure was calculated. The failure to provide the requested calculations and details was unreasonable and does not align with the landlord’s responsibility to provide this information as recommended in the 2020 spotlight report or its own service charge policy.
  24. We recognise that in this case the landlord was not the freeholder of the building, and the freeholder had instructed an external management agent. Therefore, the landlord would only be able to provide the resident with a breakdown of service charge costs and a response to service charge queries after it had received the information from the management agent.
  25. However, the evidence does not show that the landlord contacted the management agent or the freeholder to gain clarity over the external charges. Instead, the landlord provided inaccurate information to the resident or provided no information at all. The lack of clear and transparent information, coupled with the incorrect details about the service charges provided to the resident amounts to maladministration.
  26. We have considered the resident’s request for the landlord to pay the difference between the service charge it said she would pay during the sales process and the amount charged. However, this would not be a proportionate remedy for the communication failings of the landlord. While the communication was lacking, the service charges are not set by the landlord, and she has received a benefit from the management company associated with the charges.
  27. In addition, the landlord did not have sole responsibility to ensure the service charge information was correct. The external management agent provided the LPE1 form and 3 years of service charge accounts to the resident’s solicitor. Therefore, enough information was provided to query the service charge figures and ensure the resident was in a fully informed position prior to the purchase.
  28. Given the distress and inconvenience caused, alongside the time and trouble taken by the resident in dealing with this case, a payment of compensation is fair. Our remedies guidance says that where there has been maladministration that has had a significant impact on the resident a payment of compensation between £600 to £1,000 is appropriate. As such we consider a total payment of £1,000 is fair. This amount is in addition to the £50 offered by the landlord. The £1,000 is broken down as:
    1. £750 for the distress and inconvenience caused.
    2. £250 for the time and trouble taken.

Determination

  1. In accordance with paragraph 52 of the Scheme, there was maladministration regarding the information provided to the resident by the landlord regarding service charges.

Orders

  1. Within 4 weeks the landlord is ordered to:
    1. Write an apology to the resident for the identified failings in communication.
    2. Pay compensation of £1,000 in addition to the £50 already offered to the resident broken down as:
      1. £750 for the distress and inconvenience caused.
      2. £250 for the time and trouble taken.
    3. Write to the resident with a clear breakdown of all current charges associated with her property, this should include:
      1. The monthly amount of rent paid to the landlord.
      2. Any monthly administrative or management fees paid to the landlord.
      3. The 6 monthly charges set by the freeholder or external management company including:

(1)  Block service charge (which includes the service charge and reserve fund charge combined).

(2)  Estate service charge set by the external management.

(3)  Car parking charge.

(4)  Any other charges.

  1. An estimate of the future 6 monthly charges set by the freeholder or external management agent for the period June to December 2025 and December 2025 to June 2026.
  1. Within 12 weeks of the date of this report, the landlord is to review how it provides information on service charges during the conveyancing process. And how it responds to requests for service charge information from residents. It should provide evidence of this review and any actions taken.