The TPO receive a lot of questions but this is up there with some of the most common. So, why can’t The Property Ombudsman force managing agents to do repairs?
The Property Ombudsman (TPO) helps to resolve complaints between consumers and property agents when things go wrong. The Ombudsman’s role is to shine a light on what has gone wrong and adjudicate unresolved disputes in such a way as to enable both sides to move on.
However, sometimes the complexities of where responsibility lies can make the role of TPO more challenging. This month we examine the common misconception that TPO can force managing agents to carry out repairs. We look at where responsibility lies and what TPO can assist with.
A case received by TPO, in which a complainant was dissatisfied with account management and the time it took the managing agent to resolve reported issues, provides a good example of how the Ombudsman can examine a managing agent’s handling of a situation, but not force them to carry out repairs, as is often expected by complainants.
Case Study Background
First and foremost, it’s important to remember that the lease is an agreement between the freeholder and the flat owner under which the freeholder agrees to maintain the block in return for a service charge payable by each of the flat owners. The lease allows the freeholder to decide what work is done, when it is done, and does not oblige it to do any maintenance works unless there is money to pay for it.
In this particular block, there had over the years been a problem of some flat owners not paying their service charges fully, and so there was the problem of lack of money to pay for services. The freeholder, not the managing agent, entered into an obligation to use best endeavours to recover arrears but only at the cost of the flat owners through the service charge.
Like many other block owners, the freeholder had appointed managing agents to run the block, but the decisions as to what was done and how the money was spent remained fundamentally the freeholder’s. The managing agent followed industry-wide practice in preparing a budget at the start of each financial year, identifying what they anticipated would need to be spent over the next twelve months, allocating anticipated costs based on past experience and contractors’ quotes for the forthcoming year, and then apportioning the total between the various flat owners per their leases. It follows that even if only one flat failed to pay, there is a shortfall in funds to pay for all the services the managing agent identified as needed at the start of the year.
The situation becomes worse if additional expenses arise in the course of the year, for which there is no budget allocation. At that point it is a question of prioritising or taking money from a contingency fund or drawing on reserves. Alternatively, the matter has to be left until the next financial year.
At the end of each financial year, the freeholder is responsible for drawing up accounts of what has been spent and either paying back any over charge or demanding a balancing payment from flat-owners if there has been an overspend.
TPO’s experience of block accounts is that their preparation cannot be done immediately after the year end as invoices still have to come in from contractors. Late submission of invoices is a perpetual problem for managing agents and this could explain why the Complainant in this case received an additional demand for a year gone by.
Late payment of service charges for the year which has passed can also account for delays and later revision of annual accounts.
A charge for contingency based on past experience of regular but unidentifiable maintenance issues arising during the year (for example, replacing light bulbs, minor maintenance problems) will generally be made. In this case, the managing agent had, in their annual budgets, been raising a charge on account of what they anticipated would likely be spent on routine maintenance in the forthcoming year, but once that sum is spent, there is technically no more money available for any further expenditure. Sometimes priorities have to be identified.
The Complaint
It is against this background that TPO looked into the concerns raised by the complainant:
- Rear car park in darkness
- Removal of an abandoned car
- Lopping of trees which were encroaching on the block
- Provision of recycling bins
TPO looked at the managing agent’s handling of these concerns from the point of view of what were reasonable and fair expectations of service. Whilst their performance was not flawless, the Ombudsman felt that broadly they responded to the Complainant’s requests and kept her in the picture.
They reacted promptly, but the solutions were not straightforward, and this is why it took such time, not because of inefficiency on the managing agent’s part. This subsequently led to the complaint reaching TPO.
The Abandoned Car
To the Complainant, the car may well have seemed to be truly abandoned, but legal constraints applied. The managing agent could not simply arrange for it to be towed to a scrapyard. They had a legal responsibility to check if it belonged to any flatowner, then to see if DVLA could direct them to the owner. There was no budgeted money to pay for its removal, so they tried to persuade the Council to take it away free of charge. They refused. The freeholder took the view there was no more money to pay so to leave it where it was until there was money in the service account. Only when the scrap metal market changed such that it seemed that there might be some scrap value in the car could it be feasible to get it removed. All this took time.
Put simply, the managing agent had no options open to them to get the car removed, but they did what they could to assist.
Lopping of trees
In a similar vein, the trees belonged to a neighbouring property. The managing agent tried to contact the owners as the law expects. Having allowed enough time with no response, the managing agent decided they could safely go ahead with lopping where the building was being endangered, but they only had limited funds available as explained. Lopping of a second tree had to wait until more money was freed from the budget.
Car Park Lighting
The car park lighting was, as the Complainant was informed, a muddle dating back to construction of the block when a supply for the rear car park was drawn from neighbouring property. Once this was discovered by neighbouring owners, unsurprisingly the supply was cut off. Restoring lighting to the rear car park required extensive work to lay new cables underground, and such cost was, of course, not in the budget. It is not surprising that this work was deferred until a time when it could be properly costed and this does not reflect poor management by the agent. The cost would have to be included in the service charge for a following year. The decision as to whether or not to do so was ultimately the freeholder’s, and it would have to be considered as a question of relative priority.
Recycling Bins
Likewise, the provision of recycling bins was not a maintenance issue but a request for additional facilities at the block, which would come at a further unbudgeted cost. Faced with an income shortfall from flat owners and no budget allocation for recycling, again it is not indicative of poor management that this was not dealt with when the Complainant raised the matter.
The Ombudsman was satisfied that the Agent did not ignore any of the requests made. Whilst fully understanding why the Complainant felt the lighting in particular was an urgent problem, it was beyond the means available to the Agent and out of their control to resolve the problem.
TPO’s Decision and Conclusion
Based on the above, the Ombudsman did not consider the actions taken by the managing agent to address reported management issues a supportable complaint. Whether or not the freeholder was in breach of their maintenance obligations in the lease was a different question, and not a matter on which TPO could comment.
In terms of the managing agent’s account management (preparing of a budget each year and accounts at the end of the year), they acted consistently with industry norms. There was no unusual delay in sending out the annual accounts. As outlined above, there are plausible reasons as to why they can take some considerable time and may need later revision.
In this case, TPO considered that the managing agent went to some lengths to try to explain to the Complainant that funds were not available for what she wanted addressed, and why they would have to be done in a following year at additional cost to every flat owner.
TPO did fully understand the Complainant’s frustration and worry and the managing agent too recognised that she cared about the block and wanted to see it well looked after. None of her maintenance requests or suggestions for improvement of the bin areas could be considered unreasonable and indeed lighting to the car park is a safety issue.
However, TPO could not conclude that the agent was mismanaging the block. They were constrained by the fact they had to allocate money per the budget for each year and could only spend what they had been paid.
As a positive going forward, TPO was pleased to conclude that more recent budgets aimed to build up a reserve fund and reflected costs for works identified by the Complainant. This indicated a commitment to addressing maintenance issues once highlighted, but whether they would be addressed or not depended ultimately on all the flat owners paying their share of the cost.
You can contact The Property Ombudsman via their website.
