The Report that Peabody Didn’t Want You to See

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The report that Peabody didn’t want you to see graphically details how Peabody (deliberately or through negligence) consistently overcharges tenants and residents on services, and then makes it almost impossibly difficult for victims to recoup the overpayment.

Our leak was subsequently reported in the Financial Times. Read their article ‘Independent panel finds Peabody Trust overcharged leaseholders‘.

The report was commissioned by Peabody’s Scrutiny Panel because they believed service charges “have become a growing issue for many residents”.

The Panel is an independent group of volunteer residents from all tenures who investigate aspects of Peabody’s service delivery and make evidence-based recommendations to the executive and board. But whereas the Panel’s reports are normally published on the landlord’s website, this time, Peabody has resisted doing so.

One insider told SHAC:

“The report was actually finished in December but some of the senior managers whose departments were criticised were hostile to publication. There is a worry from senior managers that if it’s made public, it’ll damage sales. They want to redact [block out] some of the worst criticisms because if prospective buyers and shared owners know the truth, they won’t buy our properties.”

The Evidence

Evidence was gathered over a period of months from shared owners and leaseholders last year. Their investigation was extensive, with an online survey to over 2,000 residents generating responses from 19% of recipients. There were also discussions with 189 residents organised into 13 focus groups, and telephone discussions with 5 resident associations. The panel also looked at documentary evidence to support its findings.

The panel concludes “we believe the size and depth of our survey gives our findings considerable credence and weight.”

To get the other side of the picture, the Panel also conducted interviews with half of the Property Accounts Team, and with other Peabody departments which contribute to the service charge process.

Service Charges High, Unreasonable, and Rising Rapidly

Service charges are a huge income stream for Peabody. According to accounts submitted to the Regulator, it received over £36 million from tenants and residents in respect of service charges for the 2020/21 financial year, some of which is funded through Housing Benefit.

The findings summarised in the Panel’s report raise serious questions about the validity of this income, and must have made uncomfortable reading for the executive and board.

The investigation revealed that:

• 87% of Peabody leaseholders and shared owners thought their service charges were unreasonable for the services provided.

• 57% of leaseholders and shared owners had queried their service charges, but just 4% found the process easy with 84% finding it difficult.

• 74% of tenants and residents considered their service charges were increasing faster than inflation.

• 90% of shared owners thought that their service charges were unreasonable for the services provided.

• Shared owners reported increases of up to 85% in their estimated service charge for the current year, whilst residents in the same development who had a private landlord were seeing their service charges reducing.

As always, shared owners fare particularly badly. They might only own a quarter of their property, with Peabody owning the remainder, but the shared owner is liable for the whole of the building repair costs. None fall to the landlord.

As elsewhere, for example Hyde and Clarion, service charges are unregulated and can rise at an alarming rate. Examples quoted in the Peabody report include resident association chairs explaining their estates had variously experienced increases of 180% in 13 years, 108% in 4 years, and 100% in 5 years. All examples significantly outstrip inflation for the same periods.

Lack of Clarity

Another theme was the difficulty faced by tenants and residents just trying to find out what their charges are actually for. The Panel reporting that “amongst all survey responders 66% were either unsure of or did not know what all the charges were on their statements”.

Most leaseholders and shared owners ended up querying their service charges, and their experiences are highly illustrative of service charge problems across the housing association sector:

Despite the staggering figure of over 63% of bills containing overcharges, when a tenant or resident successfully challenged the inaccuracy, Peabody routinely claimed it was “an admin error”. There appears to have been no board oversight of the process or aspiration to make sure tenants and residents were only charged legitimately.

The faults did not always originate with the landlord. Accounts from the report include a triple charging by the same contractor for the same job. But the report points out that since Peabody doesn’t bear the cost of possibly fraudulent activity, it has no interest in eliminating it. Indeed, when staff identified errors in the service charging software, they were instructed to use it anyway.

Another factor contributing to this extremely high but not at all uncommon ‘error’ rate is a chronic understaffing in the Property Accounts Team which has 12 staff covering 66,000 properties. This resonates with criticism elsewhere of Peabody instructing neighbourhood managers to cover ever-larger patches, with a consequent decline in the standard of service provided to tenants and residents. (See Peabody Investigation: Opportunities Missed and Too Big To Care?)

Possible Equality Act Breach is a Matter of Policy

The Panel also questions the legality of Peabody’s policy on allowing tenants and residents to inspect the accounts and invoices that make up their service charges (commonly referred to as the service charge pack).

At present, the law enshrines this as a right for leaseholders only. However, even those legally entitled to inspect accounts found that Peabody’s policy requires them to do so at a Peabody office in central London within office hours.

The panel concludes that “This policy discriminates against those less able to take time off work and those with mobility issues. Therefore it is possible the policy contravenes the Equality Act 2010.”

A Damning Conclusion

After its investigation, the Scrutiny Panel declared itself shocked at the scale of inaccuracies and manner in which the whole process is handled by Peabody.

The Panel quotes the first priority in Peabody’s mission, vision and value statement, which is a pledge to ‘make our services easy to use and … right first time’.

They go on to say that “this ambition has been failing and continues to fail significantly in the calculation and application of service charges”, acknowledging that this has caused considerable stress and a negative impact on the health and wellbeing of many residents and staff. Further:

“We believe the primary objective of the Property Accounts Team should be accuracy and not maximising income collection. Applying the ‘right first time’ approach to service charges would save money in the long run by reducing time consuming queries from residents …

“Consequently we recommend that Peabody urgently takes action to improve the performance of the departments and teams involved in calculating and delivering service charges to residents.“

As the Panel noted, leaseholders and shared owners represent “the new market that Peabody looks to for future growth” and that “negative experiences amongst this group will inevitably damage the public reputation and possible development of Peabody.”

The message to any prospective Peabody leaseholders and especially shared owners is clearly ‘buyer beware’.

SHAC@Peabody-Catalyst

SHAC@Peabody-Catalyst was formed to campaign for a better deal for tenants and residents of the merged landlord. It now has its own Steering Group of tenants and residents to direct engagement and broader campaigning.

Complaints to SHAC have primarily been around disrepairs, the sale of much-needed social homes, and the treatment of disabled tenants and residents. See here for details, keep an eye on our Events page for meeting dates, and if you are a tenant or resident, register here to join us.

8 August 2022

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