Summary: Mr X complained about the Council’s management of a Charging Order between 2010 and 2022 including that it incorrectly told him the debt had been written off in 2016. The Council was at fault as it failed to maintain accurate records about the payments it received and has been unable to provide an accurate statement of the amount owed. It also caused uncertainty when it incorrectly told Mr X the debt had been written off. The Council has agreed to apologise to Mr X, reduce the debt by £1,000 and pay him a symbolic payment of £250 to acknowledge the uncertainty this caused him.

The complaint

1. Mr X complained about the Council’s management of a Charging Order against his property for a lease overpayment it made to him in 2004/05. Mr X says the Council told him in 2016 the debt was written off, but later said the debt was still active and accruing interest. Mr X says he made payments to the Council for which it has not accounted. Mr X says this has caused him distress, uncertainty and has left him financially disadvantaged.

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The Ombudsman’s role and powers

2. 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)
3. When considering complaints, if there is a conflict of evidence, we make findings based on the balance of probabilities. This means that we will weigh up the available relevant evidence and base our findings on what we think was more likely to have happened.
4. We cannot investigate late complaints unless we decide there are good reasons. Late complaints are when someone takes more than 12 months to complain to us about something a council has done. (Local Government Act 1974, sections 26B and 34D, as amended). I have decided there are good reasons to investigate this complaint. Although events go back several years, Mr X only found out the debt had not been cleared in 2021.
5. If we are satisfied with an organisation’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

6. I spoke to Mr X about his complaint and considered information he provided.
7. I considered the Council’s response to my enquiry letter.
8. Mr X and the Council had the opportunity to comment on the draft decision. I considered comments received before I made a final decision.

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What I found

Charging Orders

9. A council may apply to the county court for a Charging Order when seeking to recover money it is owed. The effect of the charging order is to put a legal charge on the property owned by the debtor so if it is sold the amount due is paid from the proceeds. The Court may order the debtor to pay the Council’s costs in making the application as part of the judgment and interest can be charged at 8% per annum.

What happened

10. In January 2003 the Council leased a property from Mr X. In July 2005 the Council terminated the lease. However, the Council continued to pay Mr X between August 2005 and January 2006 after the lease had ended and overpaid by £4723.09.
11. The Council wrote to Mr X in March 2007 to request the overpayment be returned. It also obtained an Interim Charging Order from the county court against Mr X’s property.
12. In January 2010 the Council obtained a final Charging Order (the “Order”) from the county court against Mr X’s property. The amount secured was for £6,198.08 including costs and interest to the date of the order. The Order said Mr X would continue to be liable for interest accrued on the debt.
13. In July 2012 Mr X began to send payments to the Council’s solicitors towards the debt.
14. In June 2013 the Council’s solicitors wrote to Mr X and told him it had received payments of £656.27. It told him the total amount due after interest and fees at that time was £7,000.21.
15. In July 2013 Mr X agreed to a payment plan with the Council. The Council told Mr X the Order would remain until the debt had been cleared and that interest continued to be charged. Between July 2013 and November 2016 Mr X made payments to the Council totalling £2,000.00.
16. In November 2016 the Council wrote to Mr X and told him £3,766.82 of the debt had been “written off”. The Council said it would write to him again once a new account was created on its system but did not do this. Mr X stopped making payments, as, based on the Council’s letter to him, he believed the Council had written off the outstanding debt.
17. In late February 2021 Mr X wrote to the Council to ask for evidence the debt had been cleared so that he could present the information to the Land Registry to have the Charging Order removed. He sent the Council evidence of the email he received in 2016.
18. The Council responded in March 2021 and told Mr X the debt was still present. It told him that the balance at that time was £7888.18.
19. Mr X continued to communicate with the Council and in January 2022, submitted a formal complaint. He said the Council had told him the debt was written off in 2016 and had not accounted for some payments he had made towards the debt.
20. The Council responded to Mr X in March 2022. However, Mr X did not feel the response was adequate and requested a stage 2 response.
21. The Council provided a stage 2 response to Mr X in early May 2022. It partially upheld his complaint. It told Mr X the Council accepted it had not been clear in the email in November 2016 and this had led to him believing the debt had been cleared. However, it said that whilst it had used incorrect terminology, the debt was still present. The Council offered to remove £3,587.00 of interest charged on the account and told Mr X the amount owed was £5,324.09.
22. Mr X remained unhappy and brought the complaint to us. Mr X provided bank statements dating back to 2013 that evidence payments made to the Council.
23. In response to our enquiries, the Council said:
• The records for the debt were kept on a legacy computer system. As a result of migration to the new system the Council does not have specific information relating to the debt and could not provide a statement showing all payments Mr X had made.
• In 2016 the Council moved the debt to a cost code where all “aged” debt is placed, removing it from the main system.
• It would not actively pursue Mr X for the outstanding balance as this is against his property and the Charging Order would not be removed until the full amount is paid, either directly by Mr X or upon sale of the property.
• Interest is calculated daily at £1.19 per day. In August 2022 the amount owed was £8,981.51. In May 2022 the Council told Mr X it would reduce the debt to £5,324.09.
24. The Council provided a document dated June 2013 from its solicitors with a breakdown of the debt at that time. It said the balance of the debt was £7,000.21 including calculations of interest, costs and payments received.

Analysis

25. The Council secured a Charging Order against Mr X’s property in 2010 from the county court. Mr X was liable for the full amount owed including interest until the debt was paid or the property was sold.
26. The Council’s email in 2016 telling Mr X the debt had been “written off” caused confusion and led to Mr X to believe the remaining balance was cleared and that the Charging Order would be removed. It led to him to cease his payments to the Council. This error was compounded when the Council failed to write to Mr X after it created the new account to inform him the debt was still active. The Council accepted that it used incorrect terminology. This is miscommunication and is fault. It caused Mr X frustration and confusion about the status of the debt.
27. The Council was unable to provide records of the payments it had received towards the debt. It had a statement from its solicitors from 2013 about payments to that date, but it had to rely on Mr X to provide evidence of his historical payments, which were only available back to 2013. The Council have provided multiple calculations for the debt as a result. This is poor record keeping and is fault. This caused Mr X distress and uncertainty about the accuracy of the amount he owes. The Council has not provided clear evidence of what he owes to the Ombudsman.
28. Where there is a lack of information, or conflicting evidence, we can reach a decision on a balance of probability.
29. The evidence seen indicates Mr X was making intermittent payments, first to the Council’s solicitors until 2013 and then directly to the Council between 2013 and 2016. It is likely Mr X would have continued to make payments if the Council had not told him the debt was “written off” as he had done so for several years.
30. However, the payments he made were relatively small and infrequent. Therefore, the payments would not have been sufficient to pay back the amount owed plus interest. Therefore, on the balance of probabilities, it is likely a balance of the debt would remain once these payments were accounted for.
31. Additionally, whilst the Council told Mr X the debt had been “written off”, it also told him it was transferring his account to a new system. The erroneous message from the Council uses incorrect terminology but does not remove Mr X’s liability for the debt, and in any case the Charging Order is still in place.
32. The Council offered to reduce the debt by a calculation of interest accumulated since it told him the debt was written off in 2016. However, this does not go far enough in acknowledging its poor record keeping and the resulting uncertainty about how much Mr X still owes. Therefore, although we cannot know for certain, I have made a recommendation to reflect this, based on information available.

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Agreed action

33. Within one month of the final decision the Council will:
• Write to Mr X and apologise for the frustration and uncertainty it caused when it told him the debt was written off and subsequent failure to write to him about the new account it created in 2016.
• Reduce the debt by a further £1,000 to £4,324.09 in acknowledgement of its poor record keeping and the uncertainty it caused Mr X as a result.
• Directly pay Mr X £250 in acknowledgement of the frustration, time, and trouble he has had to go to resolve the matter.
• Provide Mr X with a statement document detailing the current balance he owes and how it will calculate interest going forward.
• Offer Mr X a payment plan to repay the debt. The payment plan should indicate how long it will take Mr X to pay the debt at the rate agreed.

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Final decision

34. I have completed my investigation. I found fault and the Council has agreed actions to remedy the injustice caused by the fault.

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Investigator's decision on behalf of the Ombudsman