How indecision and a bust builder cost a landlord dear

The Independent Housing Ombudsman scheme was set up under the 1996 Housing Act to consider complaints against registered social landlords in England. The following case is typical.

Tenants complained about a major repair and improvement programme by a social landlord set up to take over a local authority's housing stock. Scheduled to take about eight months, the project included repair or replacement of all prefabricated reinforced concrete (PRC) walls because of their low insulation value, as well as kitchens, bathrooms, doors and windows.

A contractor was appointed but the work soon suffered delays. Subcontractors did not turn up, claiming they were not being paid by the company. Labour shortages put the project further behind. Four months into the work the contractor was taken over by another firm. Irregularities with the original company's finances were reported in the local press. The landlord served a notice to terminate the contract, but changed its mind and extended the contract for two months. Work kept falling behind, and the completion date was revised four times in as many weeks.

The contractor eventually went into liquidation and the landlord took direct control of the programme, completing the work four months later than planned. During that period tenants suffered severe nuisance, disruption, inconvenience and distress.

Inadequate excuses
The landlord argued that it managed the project using a well-known, licensed method that had been used by the council before the stock transfer to deal with the PRC properties. It used the same consulting engineers as the council. The contractor that won the tender was at the time a reputable company, recommended by the engineers.

The landlord also argued that the tenants had been consulted in the early formulation of the project. They had been offered alternative permanent accommodation, although the landlord acknowledged the offer may not have been fully understood. It claimed it was misled by the contractor about the reality of the situation and therefore it could not have foreseen the contractor's poor performance or its financial difficulties.

Investigation revealed many shortcomings in the way the landlord managed the project. The ombudsman established that the landlord had no first-hand experience of what PRC refurbishment would involve and relied solely on the experience of the council and the advice of its consulting engineers, who also acted as contract administrators.

The landlord kept postponing decisive measures in the hope that the situation would improve, which put residents’ safety seriously at risk

The ombudsman obtained information which showed the company had suffered a deduction for liquidated and ascertained damages twice in the previous three years, and that it was part of a group of companies of which two had gone into liquidation in recent times. The ombudsman could find no evidence that the company had previous experience in PRC refurbishment.

Although the landlord considered terminating the contract several times, when it alerted the company of the intention to enforce the notice of determination, the contractor expressed continued commitment to the project and the situation on site appeared to the landlord to improve. The landlord also thought that keeping the same contractor would be less disruptive and quicker than replacing it, which the ombudsman agreed was a reasonable assumption. However, the company's repeated failure and shaky financial management should have made the landlord aware this was not a realistic option.

The ombudsman said lack of direct liaison with the residents was the key to the landlord's inadequate control of the situation. The ombudsman criticised the landlord for not making sure, before it embarked on such a major programme, that it had clear policies and procedures in place, and that it would be able to make appropriate arrangements for the residents.

Tenant consultation is key
There was no evidence that its limited consultation exercise had enabled tenants to gauge the full extent and implications of the works about to be undertaken. The landlord demonstrated a reactive attitude during the works, continually postponing decisive measures in the hope of improvements in the situation. Consequently, the residents suffered significant inconvenience and their safety was put seriously at risk. Vulnerable residents suffered disproportionately. Elderly tenants, people in ill health, with a disability and with young children were more likely to be home during the day and thus more exposed to safety hazards and disruption.

However, the ombudsman acknowledged the landlord acted in good faith in choosing to carry out the works with residents on site and that, eventually, it took action to redress its mistakes. It showed goodwill and accepted there were important lessons to be learned. The landlord and residents have developed a consultation policy and a tenants' guide to PRC refurbishments.