Housing Ombudsman – Insight report on service charges and the Ombudsman’s jurisdiction.

On 7 December 2023 the Housing Ombudsman published its latest insight report on service charges and the Ombudsman’s jurisdiction.

The insight report highlights that service charges can be complex, and this can sometimes lead to a breakdown in communication and lead to complaints. As with previous insight reports, it highlights the need for better customer service, communication, and transparency, whilst identifying key areas for learning. This report also focusses on the key role tenancy and leases play in determining service charges.

>Here are MSB’s key take aways from the insight report:

• The tenancy agreement or lease should set out clearly what the social landlord is permitted to raise as a service charge. Social landlords must consult the legal agreement and follow it.

• If the cost does not appear in the lease or tenancy, it will not generally be fair to claim the charge unless it has been introduced later following the correct procedure. If you are amending the lease / tenancy, it must be done by agreement and usually requires a deed / court order.

• You must follow the Section 20 of the Landlord and Tenant Act 1985 procedure if it applies (for example, if the cost of qualifying works are over £250 under a long-term agreement).

• Most complaints relate to the provision of grounds maintenance, external and internal cleaning and gardening, usually because the service was poor. Ad hoc checks are therefore recommended.

• Not all service charge complaints should be dealt with by the ombudsman. Paragraphs 42(d) and (f) of the Housing Ombudsman Scheme (October 2023) states it may not investigate if it relates to a complaint about the level of rent / service charge, or it is quicker, fairer, more reasonable, or more effective to seek a remedy through the courts, other tribunal or procedure.

Examples of such legal action are declarations on the reasonableness pursuant to Section 27A of the Landlord and Tenant Act 1985r or where the interpretation of the agreement is in dispute and a final and binding decision to resolve the dispute and the Ombudsman is unable to make that decision.

• The report includes a useful table on “What the Ombudsman can investigate vs First Tier Tribunal”, plus a summary of cases on reasonableness of charges.

• The report includes key learning for the sector as follows:

1. The Housing Ombudsman Service is not always the correct forum for a dispute. We would not expect landlords to make this decision. But where a complaint relates to the level or fairness of variable service charges, we would expect landlords to ensure they signpost residents to the Ombudsman and the tribunal as well as the Leasehold Advisory Service (LEASE).

 

2. The Ombudsman expects landlords to take reasonable steps to ensure charges are calculated correctly, such as taking regular meter readings like in this case.

 

3. When assessing complaints about service charges, landlords should:

Be clear on the provision in the tenancy or lease which allows for it to make the

charge

Even where the agreement allows it, the landlord must consider if the charge is

not permitted by law. For example, a charge in a tenancy agreement for costs

associated with repairs to which s.11 of the Landlord and Tenant Act 1985

prohibits

• Ensure that it can be evidence it gave the correct notices for increases to

residents

Where it has overcharged or taken a payment it should not have, it should be

refunded immediately without conditions being applied

Consider whether the information about the service charges is in clear and

simple language and can be understood by the ordinary person with no

specialist service charge knowledge

Ensure complaint responses deal with the complaint raised and are responded

to promptly

Ensure there is a process in place for taking learning forward – Service charge

errors and failures should not be replicated year-on-year

 

4. When assessing complaints about service charges, landlords should:

Ensure they provide specific responses raised by residents promptly

Responses should be targeted to the information requested

Ensure the information they provide is accurate and consistent

Make reasonable adjustments to how they present information when a resident

asks

Landlords may want to:

Consider whether they receive common questions about the service charges

and review these to see how it can make service charge information clearer or

create a FAQ document to accompany service charge information

Liaise with residents about how they would prefer to have information presented

5. Landlords should have adequate processes in place to ensure effective communication between teams so they can fulfil their legal obligations to provide information on service charges to residents upon request, including how the grounds maintenance costs are calculated.

6. Landlords should be aware of their obligations in terms of the lease. Landlords should ensure that they are proactive in pursuing managing agents and freeholders for meaningful account information about service charges promptly.

This insight report refreshes the Ombudsman’s guidance on service charges and is a must read for anyone who works in this sector. You can access a copy of the report here.

If you have any questions on the most recent insight report, please contact Louise Murphy, Head of Social Housing and Regeneration or MSB’s Governance team.

Law is correct as of 22 December 2023

Whilst every effort has been taken to ensure that the law in this article is correct, it is intended to give a general overview of the law for educational purposes. You are respectfully reminded that it is not intended to be a substitute for specific legal advice and should not be relied upon as legal advice. No liability is accepted for any error or omission contained herein.