An offer they can refuse and refuse and refuse

With the general election looming and support by some parties for extending the right to buy to all tenants in social housing, the following case reminds us of the errors social landlords can make when dealing with tenants who already enjoy that right.

Mr and Mrs Jones (not their real names) were secure tenants who complained that a housing association had not properly dealt with their right-to-buy application and that this had delayed the purchase of their flat.

When the process began, five years previously, the association issued a statutory offer notice (under section 125 of the Housing Act 1985) with a purchase price of £295,000. Mr and Mrs Jones thought this was too high and requested a fresh valuation. It took the association four months to obtain a new one, and a further five months to issue a new offer notice. After adjustments based on the calculation of the “cost floor” and an allowance to account for the condition of the property and repairs Mr and Mrs Jones would have to carry out, the new offer was £240,000.

However, the ombudsman’s investigation established that Housing Act provisions did not allow for those repair allowances, and that the purchase price should have been calculated purely on the open market value of the Jones’ flat in its current condition.

Although the purchase of the property did not proceed on the basis of the new offer, the association failed to comply with legislation as well as its own procedures. It also failed to explain the delay in issuing the second notice.

After the association sent the second offer, Mr and Mrs Jones and their solicitor questioned the cost floor discount. The association should have responded to this promptly. But it was not until some three years into the process that, following several exchanges with the tenants, the association accepted that it had lost the original calculations and that therefore it could not explain how it had arrived at the final offer. The ombudsman criticised the association for failing to ensure that such important documents were safely stored.

The association went on to recalculate the cost floor and came to a new figure of £210,000 – a significant reduction from the original offer four years earlier. Nevertheless, Mr and Mrs Jones queried this figure too. Although it is not feasible for the ombudsman to determine what a cost floor calculation should be in a case like this, the association’s less-than-methodical approach did not suggest to him that its latest decision was fair and transparent.

Three years into the process the RSL accepted it had lost the original calculations and could not explain how
it had arrived at the final offer

By this stage, Mr and Mrs Jones had made a formal complaint to the association, and its appeal panel eventually considered their queries when the staff could not find a solution. However, it took a further four months for a letter with the panel’s decision, and a new offer, to be issued. Given that the purchase could not proceed until the panel’s decision had been communicated to Mr and Mrs Jones, the new offer should have been made much earlier.

The panel confirmed the purchase price as £210,000 and offered a sum in compensation for the time and effort Mr and Mrs Jones had invested in taking the matter through the association’s complaints procedure. But the letter communicating this did not recognise the inadequate way the association had dealt with the case right from the start.

Nevertheless, in response to the panel’s offer, Mr and Mrs Jones purchased their flat, almost five years after they first applied for the right to buy. The investigation found that before the transaction went ahead, the association should have issued a fresh statutory offer notice, but it did not. The ombudsman recommended that the association should seek legal advice as to whether the lack of a fresh notice may have limited the future liabilities of Mr and Mrs Jones to the association.

The ombudsman found Mr and Mrs Jones’ housing association responsible for maladministration in its extensive failures to deal properly with the right-to-buy application and the internal complaint. He did not award any additional compensation to Mr and Mrs Jones because they could have challenged the association’s actions at an earlier stage through the procedure prescribed in the Housing Act 1985.

In any event, it was apparent that the price paid by the complainants in the end was was based on a valuation lower than the current market value. The ombudsman ordered the association to improve the way it dealt with right-to-buy applications, either by training its staff to manage the process satisfactorily or by commissioning a competent organisation to process them.