Residential: alternative dispute resolution

Good for consumers – good for business

22 October 2015

David Pilling discusses alternative dispute resolution for property and the changing landscape

Ombudsman Services (OS) was established in 2002 and is a not-for-profit private limited company that runs national private sector schemes for the following areas:

  • telecommunications;
  • energy;
  • property;
  • copyright licensing;
  • glass and glazing sectors;
  • the Green Deal;
  • Asset Based Finance Association;
  • Which? Trusted Traders.

Its strapline is:

‘Good for consumers, good for business.’

Although energy is by far the largest scheme, OS operates Ombudsman Services: Property (OS:P), a significant and growing sector. Initially established in 2007 to cater for consumer complaints about RICS-regulated firms in the UK, OS:P was approved by the then Office of Fair Trading to provide redress for estate agents and the Department for Communities and Local Government for letting and managing agents.

OS:P is now also the approved redress provider for consumers using the services of members of the Association of Residential Managing Agents, the UK Association of Letting Agents and the National Approved Lettings Scheme.

An ombudsman’s role

OS:P ombudsman John Baguley explains that although ombudsmen have been around in the UK since 1967, there is still some mystery about what they actually do.

'In many ways, it is better to start with what ombudsmen are not: they are not regulators or consumer champions,” he says. “They resolve complaints to the best of their ability given the information before them and within the constraints of their terms of reference. Importantly, they can also make recommendations to the sector on what they think works well and where improvements can be made.'

Complaint types

The most common include:

  • apparent breaches of obligation
  • unfair treatment
  • avoidable delays
  • failure to follow proper procedures
  • rudeness or discourtesy
  • not explaining matters
  • poor or incompetent service.

An award is typically made where a defect is missed or not reported correctly. The most common complaints involve dampness, services and structural movement. Good-quality site notes and clear evidence, including photographs of the inspection, make the surveyor’s chance of success more likely.

The process

Before OS:P will accept a complaint, it ensures the complainant has engaged with the firm in question and gone through its complaints handling procedure (CHP). If the complainant is satisfied with the resolution, the OS:P’s services are not needed. Where OS:P does receive a complaint, it aims for a quick, simple and cost-effective resolution. Mutually acceptable settlement, where both parties are contacted to discuss the complaint and come to an agreement, is one option. If this cannot be achieved and a case goes to an ombudsman’s decision, then again the aim is to conclude the case quickly, within six weeks even for the more complicated cases.

If a decision is accepted by the complainant, it is binding on both parties otherwise they have the right to take their case to court. In reality, this is rare: the first question a court would ask is whether alternative dispute resolution (ADR) was available and if so, was a decision reached?

Possible outcomes could include:

  • an apology
  • an explanation of what went wrong
  • a practical action to correct the problem
  • a financial award up to £25,000.

Of course, the decision may be in favour of the firm, in which case no further action is required.

Handling complaints

There are some really simple tips in handling complaints effectively:

  • deal with the complaint promptly
  • have a simple CHP and ensure those reviewing are impartial
  • answer all points clearly and do not hide behind technical jargon
  • consider using experts, such as a structural engineer, to support the firm’s position
  • offer resolution that is proportionate
  • valuation tolerance is distinctly different to liability for negligence, do not mix it up; 10% valuation tolerance does not mean no liability exists for claims within 10% of the property’s value.

Overview of complaints

During 2014-15, OS:P handled 1,001 property complaints, 8% more than the previous year. Those about homebuyer surveys and valuations made up 42% of the cases, while issues relating to property management increased from 16% to 24% over the past 12 months.

The increase was expected given the Consumers, Enterprise and Regulatory Reform Act 2013, enacted in October 2014, which required all lettings and management agents in England to be signed up to a government-approved scheme (OS:P, the Property Ombudsman or the Property Redress Scheme).

The ADR Directive

As early as 2007, RICS members were futureproofing the profession in terms of best practice relating to complaints handling and providing access for consumer clients to free redress. The ADR Directive came into force across the EU on 9 July 2015. It requires that ADR is available for any service or contract a business provides to a consumer.

Businesses do not have to sign up for a scheme (unless compelled to through legislation or membership of a professional body). However, all organisations must give information about ADR provision in their sector and whether they are members.

RICS members and regulated firms are already meeting the directive’s requirements. Other businesses are working to ensure there is ADR provision in their sectors so that they can sign up to an approved ADR provider.

Although ombudsmen have been around in the UK since 1967, there is still some mystery about what they actually do

Mutual benefit

OS:P offers free access to an independent ombudsman when things go wrong. Consumers generally only complain when they have a genuine grievance, not merely because it is free to do so. They are increasingly becoming aware of alternatives to going to court and more likely to want to use organisations that offer this service. The benefits of OS:P to consumers include:

  • accessibility
  • ease of use
  • independence
    relatively swift conclusions to cases.

For businesses, its service is quick, cost-effective (especially given the increase in court fees announced in March), and negates the need for lawyers. It is also a private way to settle a case without either party being open to public or media scrutiny. A business is much more likely to maintain a positive working relationship with a complainant if they go through ADR than the courts.

Baguley explains:

'If the complainant remains dissatisfied after a firm has tried to settle their issue, passing it to OS:P leaves the organisation free to carry on its business, rather than wasting unnecessary resource and time.'

He adds:

'We know insurers prefer ADR to the courts, but it surprises me that firms and insurers still often get caught up in lengthy legal proceedings or discussions on issues that could have been dealt with much faster and more cost effectively by coming to OS:P.'

David Pilling is Assistant Director, Business Development at Ombudsman Services

Further information