London Borough of Newham (17 011 864)

Category : Housing > Council house sales and leaseholders

Decision : Upheld

Decision date : 26 Sep 2018

The Ombudsman's final decision:

Summary: The Council misled an applicant for a shared ownership property about how it would set the price. It failed to tell the applicant it had changed the garden and refused a new valuation. The Council withdrew from the sale without good reason. It then did not deal with a complaint about this but sent it to external litigation solicitors and tried to hold the applicant responsible for the costs of this. The Council caused the applicant injustice because he lost the property and had over £3,000 in abortive costs. The Council also caused the complaint significant time, trouble, distress and outrage. The Council will pay the complainant £6,000 and improve how it administers its shared ownership scheme.

The complaint

  1. The complainant, whom I will call Mr X, complains about the way the Council dealt with his application to buy a property under its NewShare shared equity scheme. He says the Council:
  • Did not have an up-to-date valuation when it wanted to go ahead with the sale.
  • Refused to give him a copy of the valuation which he had to get through a freedom of information request.
  • Did not tell him there had been a significant change in the property which had reduced its value.
  • Asked him for a higher price than the market valuation although it was affordable housing.
  • Withdrew from the sale without addressing his request for a new valuation based on the significant change and without providing reasons.
  • Did not return his reservation fee when it withdrew from the sale.
  • Would not deal with his complaint about these matters through its complaints procedure and instead insisted he use a solicitor and dealt with the Council’s solicitors.

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The Ombudsman’s role and powers

  1. We investigate complaints about ‘maladministration’ and ‘service failure’. In this statement, I have used the word fault to refer to these. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. If there has been fault which has caused an injustice, we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
  2. We investigate complaints about councils and certain other bodies. Where an individual, organisation or private company is providing services on behalf of a council, we can investigate complaints about the actions of these providers. (Local Government Act 1974, section 25(7), as amended)
  3. If we are satisfied with a council’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)

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How I considered this complaint

  1. I considered the information provided by Mr X and discussed the complaint with him.
  2. I considered information from the Council, asked to inspect its files and interviewed officers.
  3. I took legal advice on whether the NewShare scheme is affordable housing and contacted third parties.
  4. I asked Mr X and the Council for comments on a draft of this decision. I considered comments received before I made a final decision.

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What I found

  1. There are several definitions of affordable housing. The 2012 National Planning Policy Framework says affordable housing is social rented, affordable rented and intermediate housing, provided to eligible households whose needs are not met by the market. A council decides eligibility for affordable housing from local incomes and house prices. Intermediate housing is affordable homes for sale or rent at a cost above social rent, but below market levels. These can include shared equity (shared ownership and equity loans).
  2. In 2012 the Council secured a grant from the Greater London Authority (GLA) of over £1 million towards the cost of providing new-build affordable housing. Under the terms of the GLA grant the Council had to get a valuation from a Royal Institute of Chartered Surveyors (RICS) qualified independent valuer. The Council could only charge above the RICS valuation if it had a robust business case and the GLA approved the higher price.
  3. In 2013 the Council used its powers under the Localism Act 2010 to create an affordable housing scheme called NewShare. It intended to use the GLA grant towards the cost of this.
  4. The NewShare scheme has new build properties and refurbished Council properties. The applicant funds between 50-70% of the cost from a deposit and commercial mortgage. The Council makes up the difference with an equity loan at an initial annual fee of 1.75%. The fee increases yearly by the retail price index plus 1%. The applicant owns 100% of the property but the Council has a second charge on the property for its share. The applicant must repay the Council in full for its share of the property within 25 years. How much applicants pay the Council depends of the value of the property when they redeem the loan.
  5. The Council uses a private estate agent to market the NewShare properties and handle the day to day management.
  6. In December 2014 the Council granted planning permission for a NewShare development I will call “the development”.
  7. The Local Government Act 1972 puts a council under a duty to secure the best price for land it disposes of.
  8. The Housing Act 1985 gives a council general consent to dispose of land. It must do this at the market value. It defines market value as “the amount for which a property would realise on the date of the valuation on a disposal between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing where the parties had each acted knowledgeably, prudently, and without compulsion and where the market value is assessed not earlier than three months before the buyer applies or agrees to an offer in writing”.

The sale

  1. In February 2017 the Council’s estate agents (the “agents”) instructed a RICS qualified surveyor to provide market values for the properties. The development was under construction. On 16 March the RICS valuer gave a market value of £500,000 for the house in this complaint (the house). The valuer provided a full report. He said this price included a new build premium which might not be realised on future sales. As the house was still under construction the valuer said it would need a re-inspection when the work was complete.
  2. The agents started to market the development.
  3. Mr and Mrs X had a shared ownership property with a different social housing provider. They wanted a bigger home and applied to NewShare. On 25 March 2017 Mr and Mrs X reserved the house; a three-bedroom property with a small rear garden. They had to pay a reservation fee of £500 and an administrative fee of £385.
  4. The Council put the price of the house as £525,000. The Council had asked its agents to give their valuation on all the NewShare properties when they received the RICS valuations. The Council used the agents’ valuations for all the properties. The Council has no paperwork for the agents’ valuations and the agents are not RICS qualified and not independent of the Council. The Council say the agents’ valuation is the market value as it is what people were willing to pay. It says buyers could get their own valuation.
  5. In May 2017 Mr and Mrs X had a financial assessment with the agents’ approved financial advisors. To sell their current shared ownership home Mr and Mrs X had to have a RICS valuation and sell the property at that price. If they had not sold their home within three months of the valuation, they had to get a new valuation. They told the Council they had instructed a RICS valuer to value their current home.
  6. The Council said Mr X had to sell his current home before it would confirm it had accepted him on the NewShare scheme. Mr X said this was unrealistic and in May 2017 the Council agreed and told the agents they could sell the house to Mr X.
  7. The Council Officer then dealing with NewShare applications emailed Mr X on 3 May 2017 and said:

“With regards to valuations of our properties, these are carried out by a RICS Surveyor, and remain valid for 3 months. Where a property has been on the market for this length of time, we will then either seek a new valuation, or consider a reduction in price.”

  1. Work ended on the development in late August 2017. On 24 August the Council drew up a Memorandum of Sale (MOS). This includes the name and address of Mr X’s solicitor (Solicitor 1) and mortgage broker. It invited Mr X to view the house. At the viewing Mr X discovered that nearly half the small garden was now a fire escape route. The Council placed a covenant on the house with the Land Registry this says the owner must not:

“Obstruct, put, place, keep or store any material or erect any structure nor to plant any shrubs, trees or any other plant on the part of the Property which is the Fire Exit or use the Fire Exit for any other purpose than as an emergency escape route”

  1. There were now gates either side of the garden that Mr X could not lock as it was the fire escape route from other properties.
  2. The fire escape route was not on the plans seen by Mr X In March 2017. However, correspondence between Building Control and the Architects show the Council added fire escape route in October 2015. The Council did not tell people who had reserved the properties about the fire escape route. The agents say they did not know about it until they got the final documents from the Council in August 2017.

The complaint and the Council’s withdrawal from the sale

  1. On 28 August 2017 Mr X complained to the Council that it had not told him about the escape route and asked the Council to carry out a new RICS valuation. He asked the Council to put a hold on the sale until he and the Council had resolved the issue. The Council acknowledged his complaint and said it would reply within 20 working days.
  2. Throughout September 2017 Mr X says he telephoned the Complaints Department at least twenty times but no-one answered or responded to his voice mails. The Council says it only stores telephone calls for three months.
  3. The Council did not put the sale on hold. On 31 August Mrs X told the agents they had a buyer for their home and they were waiting for a response from the Council. On 7 September the agents said Mr and Mrs X needed a mortgage before they could go ahead with the purchase. The agents also wanted confirmation of the sale of their home by 11 September. Mrs X replied that she needed the Council’s response before paying the £500 mortgage arrangement fee. She hoped to have this soon and said they still wanted the house. Mrs X said the agents could contact the Council to confirm this.
  4. The Council employed external solicitors (Solicitor 2) for conveyancing. On 7 September Solicitor 2 sent Solicitor 1 several documents about the sale but did not attach the MOS. Solicitor 1 says she did not receive this email. The agents contacted Mrs X again on 14 September and asked what she had asked the Council for. Mrs X responded the Council was due to respond any day and she would be in touch with the agents straight away.
  5. On 18 September the agents asked Solicitor 2 to contact Solicitor 1 to find out about the sale of Mr and Mrs X’s property. Solicitor 2 asked Solicitor 1 for solid evidence that Mr and Mrs X were selling their home. Solicitor 1 responded she did not know what client they were contacting her about. Solicitor 2 sent Solicitor 1 the MOS on 19 September 2017. This said the parties should exchange contracts with six weeks. From then on, the Solicitors contacted each other directly about the sale.
  6. On 19 September the agents contacted a manager at NewShare. The agents said for some months they had tried to get information from Mr and Mrs X but they were refusing to give this because of talks with the Council. The agents asked permission to withdraw from the sale if Mr and Mrs X did not provide the information by the close of business the next day. The Manager asked the agents to contact Solicitor 1 for details of who Mr and Mrs X had complained to. She said if the Solicitor would not provide this, this was a breach of condition and the Council would withdraw the sale. The agents said they had done this and told Solicitor 1 that Mr and Mrs X would breach the terms and conditions of sale if they did not provide the information.
  7. On 20 September Solicitor 1 told Solicitor 2 who the estate agents were for Mr and Mrs X’s property and said she would contact them for an update as she thought they had a buyer. On 22 September the agents told the Manager Mr and Mrs X did not have a buyer and again asked for authority to withdraw from the sale. The agents have shown me a text from the Manager dated 22 September. This says if Mr and Mrs X did not comply with the terms and condition by 27 September the Council would withdraw from the sale.
  8. On 26 September Mr X contacted the Complaints Department as it had not responded to him, he wanted its response now. He also asked the Complaints Department to ask NewShare to allow him to get the complaint response before continuing with the sale.
  9. The Complaints Department now started to look at his complaint and on 26 September contacted the Manager for information. The Manager passed a copy of the complaint to the agents and agreed with the Complaints Department to put a hold on the sale until the end of the following week.
  10. On 9 October the Complaints Department pressed the Manager for the agents’ response. The agents then responded that Mr and Mrs X did not have a mortgage because they had not sold their home and so had breached the terms and conditions. The agents said Solicitor 1 was not responding to them.
  11. Mr and Mrs X did have a buyer and on 4 October their estate agents had agreed terms with their buyer and served a MOS. The estate agents put on their website the property was sold subject to contract.
  12. A Complaints Officer emailed Mr X on 9 October to say a response to his complaint was imminent.
  13. Solicitor 1 and 2 were in contact on 9 and 10 October. On October 9 Solicitor 1 mistakenly thought Mr and Mrs X’s sale had fallen through but corrected this. On 10 October Solicitor 2 said he presumed the sale to Mr and Mrs X was going ahead. He hoped this would happen as soon as possible and asked if Solicitor 1 was happy with the details he had inserted in the documents.
  14. The agents say on 9 October they contacted Mr and Mrs X’s estate agents who said they did not have a buyer. The Council’s agents have no record of this. I have seen an email from Mr and Mrs X’s estate agent. In this he says the Council’s agents did not contact his company and if they had, they would have said the property was sold subject to contract.
  15. The Complaints Officer asked advice from the Council’s Property Team. The Property Team said Mr X raised issues about the purchase of the property which were conveyancing matters Solicitors 1 and 2 should deal with. He advised the Complaints Department not to get involved.
  16. On 11 October the agents emailed NewShare and the Complaints Department and said they believed the sale was not going ahead. The agents’ asked what was happening with the complaint and if they should hold the property. The Complaints Manager emailed the NewShare Manager to say they were about to respond to the complaint and they should take the hold off the property.
  17. In the morning of 12 October 2017 the Complaint Department told Mr X it would send its response later that day. The same morning the agents sent an email to Mr X. This said on instruction from the Council they had withdrawn the property from Mr and Mrs X and put it back on the market. The Manager says the agents gave her the impression they had heard nothing from Mr and Mrs X since March. She says she did not know the agents had withdrawn the sale. She said she intended to lift the hold on the sale and give Mr and Mrs X the opportunity to meet the conditions. Mr and Mrs X could then deal with the garden and price as conveyancing issues through their solicitors.
  18. On the afternoon of 12 October the Council responded to Mr X’s complaint. It said:

“as the potential purchaser of (the house), you should be making enquiries concerning the land demise and general building through your solicitors and they in turn would then make a formal representation on your behalf through our solicitors. As a consequence of the information exchanges between the respective solicitors, you would then be able to make an informed decision about whether or not you still wished to proceed with the purchase transaction to buy (the house). In summary, any queries you have regarding the property should be directed to our solicitors to address.”

  1. Mr X told the Complaints Department the Council had withdrawn from the sale and asked for an explanation. In the next week Mr X sent several emails asking the Complaints Department why he needed a solicitor. He explained as the Council had withdrawn from the sale it was no longer a conveyancing matter and it would cost him to use a solicitor to complain. The Council always responded he had to go through solicitors and it could not help him further.
  2. Mr X asked the agent for the RICS valuation for the house. The agent refused and Mr X got it through a freedom of information request. He discovered the price the Council asked for was £25,000 more than this valuation. He added this to his complaint and wanted compensation for the unnecessary expense the Council had caused him. He also wanted the Council to return his reservation fee.
  3. The Council asked Solicitor 2 for advice. This was the first Solicitor 2 knew the Council had withdrawn from the sale. It had recently asked Solicitor 1 for an update. Solicitor 2 told the Council this was no longer conveyancing but litigation. The Council asked Solicitor 2 to provide litigation advice and it did. However, the Council still told Mr X it was a conveyancing issue and he needed to go through solicitors. It did not tell Mr X he could complain to the Ombudsman.
  4. As Mr and Mrs X could no longer buy the house they lost the sale of their home. They had paid a RICS surveyor £420 and Solicitor 1 £1,746.
  5. In November 2017 the agents agreed to sell the house to other buyers.

Mr X complains to the Ombudsman

  1. Mr X found out about the Ombudsman. We asked the Council for its complaint response. On 30 November 2017 the Council told us Mr X could not use the complaints procedure. It repeated what it had told Mr X on 12 October and said this was still its position.
  2. The Council then asked Solicitor 2 to respond to Mr X’s complaint. An email from Solicitor 2 to the Council reports the difficulties faced contacting the Council. It said its litigation solicitor did not get a response to her telephone calls and her emails bounced back as inboxes were full. Solicitor 2 suggested the Council should return Mr X’s reservation fee. The Head of Service agreed to this but no-one told Solicitor 2.
  3. On 14 December 2017 Solicitor 2 sent Mr X its response. Solicitor 2 said Mr X knew about the fire escape route before the exchange of contracts and he could have withdrawn from the sale. Solicitor 2 said the Council could set its own price and Mr X could have got his own valuation. Solicitor 2 said it sent the documents to Solicitor 1 on 1 September and Mr X had 28 days from the service of the MOS to exchange contracts. Solicitor 2 said by 12 October Mr X did not have a mortgage and Solicitor 1 and his estate agent confirmed his onward sale had fallen through. Solicitor 2 said if Mr X tried to claim against the Council it would robustly defend this and seek costs against Mr X.
  4. In February 2018 the Council told the Ombudsman it withdrew from the sale as Mr X had 28 days from 1 September to exchange contracts and had failed to do this. It said it did not return Mr X’s reservation fee because of the costs it had incurred. It said for several months its agents asked Mr X and Solicitor 1 for information about his sale but did not get a response. It said it did not need a new valuation as it offered the house to Mr X subject to contract on 25 March 2017. It denied the fire escape route was a change as the route still belonged to the home owner. It said it could not comment on its email of 3 May 2017 as the officer who sent it no longer worked for the Council.
  5. We asked the Council to provide evidence of the GLA approval to charge above the RICS valuation and evidence of the costs it had incurred. In March 2018 the Council said it did not have GLA funding as it used its right to buy receipts and GLA rules meant it could not use both. It said Solicitor 2 charged the Council £925 plus VAT for dealing with Mr X’s complaint.
  6. We questioned the use of right to buy receipts as a council cannot use them for owner-occupied housing. We also asked for a copy of the Council’s bid to the GLA. In April 2018 the Council said it did not use right to buy receipts or GLA funding, it said its accounts proved this. It said it was justified in holding Mr X responsible for its litigation costs from Solicitor 2 as: “the legal advice was only obtained to answer (Mr X’s) complaints.”
  7. It said it would send us the GLA bid documents the following day. It did not. We again asked for a copy and for the accounts mentioned by the Council. The Council said it could not find the records. It again said its accounts proved it did not get GLA funding but did not send us a copy.
  8. In May 2018 the Council sent us a copy of an email and a screen shot where it had deleted the grant funding. The GLA confirmed to us it had agreed the grant but the Council later withdrew the bid. Several other NewShare schemes gained planning approval in 2014. In 2017 the Council applied to amend some of the planning permissions. The Committee reports say to get the GLA grant the Council needed to complete the new properties by the end of March 2016 and, as this did not happen, it could not claim the grant.
  9. We arranged to interview officers and inspect the Council’s files at the Council’s offices on 17 May 2018. The Council did not provide any files for the inspection. Three officers did not attend the interviews; only one had a reasonable excuse. Those that did attend said they did not know the interviews concerned Mr X’s complaint.
  10. The Council apologised and the Head of Service said she would courier the files to us the following week. She also said she would provide a breakdown of the funding for the scheme. The Council did not send us the files and we threatened a witness summons. The Council sent us photocopied documents on 20 June but did send any information about funding.
  11. On receiving the documents we decided not to witness summons the two officers who had not given a reason for not attending the interviews. This is because the information now provided for their part in the complaint was sufficient. We did conduct interviews with another three officers whose involvement became apparent during the first set of interviews.

The interviews

  1. The interviews established that in October 2017 NewShare and the Complaints Department did not know the agents had withdrawn the sale but the agents thought the Council had told them to do this.
  2. Officers said the Council should have dealt with Mr X’s complaint and then carried on with the sale. Alternatively, the Council should have told Mr X straightaway the price and garden were conveyancing matters.
  3. The Council does not use external solicitors to deal with complaints and does not charge complainants for dealing with a complaint. Officers could not think of any other time this had happened. They thought it happened this time as the situation was confused and involved so many people.
  4. NewShare officers said Mr X had six weeks, not four, to exchange contracts from the service of the MOS. Officers and the agents said six weeks is a short timescale and sales often overrun this, especially when there is a chain involved. The agents confirmed they would only carry out a new valuation if the Council told them to.
  5. NewShare officers said they got a RICS valuation as a comparable for its own agents’ valuation.
  6. Officers said the Council should have sent Mr X the RICS valuation when he asked for it. They also agreed the change to the garden was a material change and the Council should have agreed to new valuation. However, they could not know if this would have reduced the price.
  7. Officers said they had difficulty replying to us as they could not find the information I wanted. Record keeping was not good and it held information about NewShare in several different locations. Individual officers had information but you had to know who they were. The Council has a major restructure in 2017 and all the officers involved with NewShare changed.
  8. The Head of Service said the Council now accepts the way it handled the complaint was wrong. She says the Council should have done a new valuation, should not have pulled out of the sale and should have returned Mr X’s reservation fee. The Head of service said she would return the fee and invite Mr X to apply for another NewShare property.
  9. Mr X declined the offer of another property as he had exchanged contracts on a new home elsewhere. The Council has not returned the reservation fee.

Analysis

  1. An issue for this complaint is the lack of proper records for NewShare and poor communication. When there was a major restructure the Council lost its knowledge about the history of the scheme. Because of this the Council has given poor and sometimes wrong responses to the Ombudsman. It has appeared obstructive and defensive, even if it did not intend this.

Did the Council need an up-to-date valuation when it wanted to go ahead with the sale

  1. The Council set a price in March 2017. Mr X signed a reservation form containing this price in March 2017. The Council drew up the MOS in August but Mr X did not sign this. The Council must carry out a market price valuation “three months before the buyer applies or agrees to an offer in writing”. The Council argues that Mr X agreed an offer in writing in March so it did not need a new valuation. If in dispute, it is a matter for a court to decide if the reservation form is a written acceptance of an offer. There is no reason for us to decide this as we address the need for a new valuation in a separate finding.

Did the Council refuse to give Mr X a copy of the RICS valuation

  1. The Council’s agents refused to give Mr X a copy of the RICS valuation. The agents acted on behalf of the Council and the Council is responsible for the agents’ actions. The Council accepts it should gave given Mr X a copy and so it put him to the unnecessary time and trouble of getting it through a Freedom of Information request. If the agents had given Mr X a copy it could have explained why the price on this differed to the price asked for.

Did the Council fail to tell Mr X of a significant change in the property which had reduced its value

  1. The Council failed to tell Mr X about the fire escape route. The Council introduced the route in 2015, two years before it marketed the property. Therefore, the Council showed prospective buyers and its agents the wrong plans. The Council is at fault. It caused injustice as the unwelcome surprise of the much-reduced use of the garden set off the train of events that led to Mr X losing the house.

Did the Council ask Mr X for a higher price than the market valuation although it was affordable housing

  1. When the Council set up NewShare it had a GLA grant which meant the Council had to use the RICS valuation and update this if it did not sell the property within 3 months. The Council could not claim the grant as it ran out of time. The Council then did not have to follow the funder’s rules.
  2. The Council must dispose of its land for the best price. The agents gave a value of £525,000, £25,000 above the RICS valuation and buyers were willing to pay this. When applying for their commercial mortgage, buyers needed their own valuation. None of the buyers' valuation led to a lower price. Therefore, it is arguable the Council did sell the properties at the best price. The scheme remained affordable housing because of the low-cost equity mortgage provided by the Council.
  3. Even though the Council did not have to apply the GLA rules, it told Mr X in May 2017 it used RICS valuations. This is fault as it was untrue. The Council had asked the agents to set a value in March 2017 and used this higher value.
  4. Mr X already had a shared ownership home. The housing provider had to get a RICS valuation when he bought it and he had to get a RICS valuation when he wanted to sell it. The Council led Mr X to believe it followed the same process.
  5. When Mr X found out the Council had asked him £25,000 more than the RICS valuation he was justifiably outraged. He considered the Council dishonest. The Council did not address this or apologise when dealing with his complaint. It only said it could charge what it wanted. In response to us the Council did not take responsibility for telling Mr X something that was not true. Instead it said it could not comment as the Officer had left.
  6. The Council caused injustice to Mr X when it misled him. Its actions resulted in suspicion the Council was trying to hide something.

Did the Council withdraw from the sale without addressing Mr X’s request for a new valuation based on the significant change and without providing reasons

  1. The Council has inadequate records and communication between those involved was poor. Because of this different departments and companies had different opinions about what was happening with the sale. The agents wrongly told NewShare it had asked Mr and Mrs X to provide information for several months and they had refused to provide it. The agents did not tell NewShare or the Complaints Department it had withdrawn from the sale. NewShare wanted to carry on with the sale but did not make this clear to the agents.
  2. Mr X’s experience was the only way of changing a price on a shared ownership property was by a new RICS valuation. Mr X asked for a new valuation on 28 August, soon after viewing the property. As neither the RICS valuer nor the agents knew about the restriction on the garden when giving a value, the Council should have agreed to a new valuation. Only the Council could approve this. The Council is at fault as it did not have a valuation that included the change to the garden.
  3. Mr X asked the Council to put a hold on the sale until he had an answer to his complaint. As the Complaints Department did not deal with this in a timely manner, it did not tell NewShare about the complaint or the request for a hold until the end of September.
  4. The Council withdrew from the sale before it replied to his complaint. It then did not reply to Mr X’s complaint saying it was a conveyancing issue. It stuck to this even after Mr X told it the Council had withdrawn, we had asked for its reply and Solicitor 2 said it was not a conveyancing issue. The delay in dealing with the complaint is fault. This caused injustice as if the Council had dealt with the complaint the sale is likely to have gone ahead.
  5. The agents did not tell Mr and Mrs X why it had withdrawn from the sale. Since then the Council and the companies it used have provided different reasons for the withdrawal.
  6. The agents believed Mr and Mrs X did not have a buyer when they did and Solicitor 2 knew this. They say Mr and Mrs X’s estate agents confirmed there was no buyer on 10 October 2017. Mr and Mrs X’s estate agent denies this. We have seen solid evidence that Mr and Mrs X’s property was sold subject to contract on 4 October 2017. We can see no reason their agents would have said otherwise. They say Mr and Mrs X did not have a mortgage but Mrs X had said she did not want to pay the arrangement fee until she had the complaint response. They say Mr and Mrs X refused to tell them what their complaint was about bur Mrs X had given them permission to contact the Council about this. They knew what the complaint was about on 26 September as the Council sent them a copy of it. The agents say they had told Mr and Mrs X and Solicitor 1 that they were in breach of terms and conditions but we have seen no evidence of this.
  7. The Council told us it had served the MOS on Solicitor 1 on 1 September 2017 and Mr and Mrs X had to exchange contacts before 2 October. This is wrong. The MOS gave six weeks not four and Solicitor 2 did not send it to Solicitor 1 until 19 September; three weeks before the Council withdrew from the sale
  8. Solicitor 2 also wrongly said Mr and Mrs X had to exchange contracts within four weeks of 1 September and said they did not have a mortgage and a buyer by this time.
  9. The failure to give reasons for withdrawing from the sale and not having good reason to withdraw from the sale is fault.

Did the Council return Mr X’s reservation fee when it withdrew from the sale

  1. The Council did not return the reservation fee even though Solicitor 2 suggested this and the Head of Service agreed. Instead the Council held Mr X responsible for the costs it incurred in instructing Solicitor 2 to give advice and answer the complaint.
  2. The Council agreed to refund Mr X’s reservation fee on 18 May 2018 but still has not done so

Did the Council refuse to deal with Mr X’s complaint through its complaints procedure and instead insist he use a solicitor and deal with the Council’s solicitors.

  1. The Council did tell Mr X he had to go through his solicitors under the mistaken assumption the sale was going ahead, even when Mr X told it otherwise.
  2. The Council has no provision to delegate complaints it receives to external solicitors and to charge the complainant for this. The Council’s insistence Mr X had to go through solicitors is fault. This caused injustice because of the unnecessary time, trouble and frustration it put Mr X to.
  3. Solicitor 2 and the Council treated Mr X’s complaint as litigation. Solicitor 2’s role as the Council’s external Solicitor was to defend the Council. Therefore, asking Solicitor 2 to deal with the complaint meant the Council did not look at the issues itself and missed the opportunity to resolve them before it sold the property to someone else.

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Agreed action

  1. To put matters right for Mr X within one month of our final decision the Council will:
  • Apologise to Mr and Mrs X.
  • Pay Mr X £6,000. This is to cover the £885 reservation fee and administrative costs and the £2,166 RICS and solicitor costs Mr X incurred. It is also for the Council’s withdrawal from the sale of the house and the time, trouble, distress and outrage the Council caused.
  • Within three months of our final decision the Council will provide the Ombudsman with an action plan of how it will improve record keeping and communication for the NewShare scheme. This could include introducing a shared database for all those involved in the sales process.

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Final decision

  1. The Council is at fault for the way it dealt with Mr X’s NewShare application and how it dealt with his complaint. It caused considerable injustice to Mr X. The Council has agreed to our recommendations and will provide a suitable remedy for the complaint. I have completed my investigation and closed the complaint.

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Investigator's decision on behalf of the Ombudsman

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