Homes England

2. Mrs O complains that Homes England and Target excessively delayed its decision to approve the sale of her house, which was in negative equity. She also complains that both Target and Homes England failed to provide any meaningful updates during this period.

3. She says Homes England’s delay in approving the negative equity sale of her property caused unnecessary financial losses since she had to make mortgage payments for her current home for longer. She says poor communication by both bodies caused severe distress because, in the absence of a timescale, as to when she could expect the shortfall to be approved, her buyer repeatedly threatened to pull out.

4. By bringing her complaint to us, Mrs O wants her financial losses reimbursed and compensation for distress. She considers the compensation and reimbursements together should equal £10,000.

5. The government operate a scheme called ‘Help to Buy’ which offers equity loans to first time buyers towards the cost of buying a house. This scheme is implemented by Homes England and Target. The loans range between 5% and 20% of the total cost of the house, or up to 40% in London. It is referred to as an ‘equity loan’ because the loan is intrinsically tied to the value of the house. When the buyer decides to sell the property, the government is owed the same percentage originally loaned of the property’s total value at the time of sale.

6. This means that, if a buyer borrowed 5% to buy a £200,000 home, and its value increases to £400,000 by the time the buyer wants to sell, the buyer will owe the government 5% of £400,000.

7. Target provides mortgage administration services on behalf of Homes England. Homes England has advised that, typically, Target is able to approve cases involving Help to Buy Equity Loans without input from Homes England.

8. However, it explained that in cases involving significant negative equity on a house sale Target must refer cases to Homes England for approval. This happens when a house that has been purchased through a Help to Buy Equity Loan is worth less than the price it was bought for at the time the borrower intends to sell it.

9. In these instances, it is Homes England’s decision whether to approve the shortfall sale and write off the negative equity owed by the lender. In November 2020, Mrs O decided to sell the property she had purchased through Help to Buy. It is our understanding that there was negative equity on Mrs O’s property of £13,000.

10. Target escalated her application to Homes England for approval in December 2020, due to the negative equity involved. Mrs O contacted Target a few days later to ask how long the process would take. Target explained it had been escalated to Homes England but was unable to provide a timescale.

11. From February to March 2021 Mrs O called Target frequently requesting an update. The volume of calls was high, and sometimes daily. The call notes show Target was unable to provide a timescale at each opportunity and consistently explained that the case was with Homes England. During this period Mrs O also frequently emailed Homes England for an update.

12. Mrs O opened a complaint with Homes England and Target in early February 2021 about how long it was taking to reach a decision. Homes England responded four days later to explain it was investigating her complaint, and in March 2021 to advise that her application was still under review by the legal team.

13. Homes England approved the shortfall sale and wrote off the outstanding negative equity in early April 2021.

14. Homes England wrote to Mrs O to confirm the outcome of its investigation the following day. It apologised for the delay in approving her application. It explained there was a huge backlog of requests nationally for surveys to be carried out on buildings with cladding. It explained that, as a result, there were significant delays to all housing organisations dealing with requests for redemptions of buildings affected by reduced valuations and negative equity.

15. It also explained that the pressures of the pandemic had meant Homes England and Target staff were operating at reduced capacity from home, and that this may have contributed to the delay.

16. Target wrote to Mrs O with the outcome of its own investigation in June 2021. It upheld her complaint and apologised for how long it took for her shortfall application to be approved. It agreed with Mrs O that the time taken was excessive and apologised, but then said that responsibility for this was ultimately Homes England’s. It also apologised for not completing its investigation within the timeframes set out in its own complaints handling guidance.

17. Mrs O remains unsatisfied with both Target’s and Homes England’s responses and would like us to recommend that they compensate her £10,000.

Timescale of shortfall approval

20. Mrs O complains that Homes England and Target excessively delayed Homes England’s decision to approve the negative equity sale of her house.

21. Target referred Mrs O’s application to Homes England shortly after she decided she wanted to sell her home in November 2020. Homes England explained to us that, until August 2021, Target would, by default, refer any cases to Homes England that were not covered in standard guidance on equity loans. It explained that novel issues, such as negative equity or cladding, are not included in this standard process. It is our understanding that Homes England’s legal team would then review these cases on an ad hoc basis due to their complex and novel nature, and Mrs O’s case followed this process.

22. Our Principles of Good Administration state that public bodies should follow their own policy and procedural guidance, whether published or internal. We have seen Target’s 2020 guidance on redemption of equity loans, and there is no instruction on how to process a case involving significant negative equity, such as this one.

23. We consider that Target acted reasonably in declining to act on a case that was not covered by its own policy. Furthermore, Target’s decision to refer it to Homes England was in line with Our Principles. It referred the case to Homes England around three weeks after Mrs O made her application.

24. Given the pressures of the pandemic, the novel nature of Mrs O’s case and the high unexpected workload on Target as a result of cladding-related applications (we expand on these pressures in paragraphs 29-31) we consider this was a reasonable amount of time for it to have taken.

25. This means that, from early December 2020 to April 2021, the case was with Homes England. This period forms the vast majority of the delay.

26. We asked Homes England why it took just over four months for it to approve Mrs O’s shortfall. It explained that Mrs O’s solicitors did not provide all the documentation necessary to process her application until early April. These were the Memorandum of Sale, and a copy of the Mortgage Redemption Statement. It says that, once it received this information, it processed and approved Mrs O’s case eight days later. It also said that had Mrs O’s solicitor sent this information sooner, Homes England would have approved the shortfall sooner.

27. We have seen email correspondence between Mrs O’s solicitor and Target, and we can see that the solicitor did not provide the Memorandum of Sale or Mortgage Redemption Statement until early April. Target then referred these documents to Homes England almost immediately.

28. Homes England cannot approve the negative equity sale of a house without a Memorandum of Sale because this document is necessary to produce the Redemption Quotation, which is an estimate of the final figure required to redeem the equity loan. Homes England needs to have an estimate of the outstanding amount owed to decide whether it can reasonably write off the shortfall.

29. Homes England also explained that there were significant and novel pressures on staff during this period. It explained that, following the Grenfell Tower Fire of 2017, Homes England’s resources have been extremely strained due to the sudden exponential increase in work related to properties with cladding. For instance, it said that pre-Grenfell, the legal team might review 16 novel cases in a day, whereas post-Grenfell this became about 64 cases per day. It said this was further compounded by the evolving nature of the information and advice coming from the Government and the Royal Institution of Chartered Surveyors about how to deal with these cases.

30. Homes England advised that because negative equity cases and cladding cases were both dealt with by the legal team, the sudden influx of cladding cases meant that negative equity cases were also massively affected by the delay. Homes England also said it was affected by COVID-19 staffing pressures due to the sudden switch to home working in 2020.

31. Homes England has explained that, since August 2021, it has now implemented a documented process for dealing with cases involving negative equity. Target’s role before August 2021 was strictly administrative. It explained that it has expanded Target’s authority and expertise so Target can now approve similar cases without Homes England’s involvement. It also explained that it has improved its remote working practices.

32. Our Principles of Good Administration state that when public bodies make decisions they should take account of all relevant considerations, ignore irrelevant ones and balance evidence appropriately.

33. It would not have been correct for Homes England to decide on Mrs O’s application without first confirming the total negative equity. To do so, it required the Mortgage Redemption Statement and Memorandum of Sale from Mrs O’s solicitors. These documents were necessary pieces evidence that Homes England needed to consider in its decision whether it decided to accept Mrs O’s offer to pay the shortfall herself or whether it would write it off. Mrs O’s solicitors did not provide this until early April. Once they did so, Homes England approved the shortfall within two weeks.

34. Ultimately, it was Mrs O’s solicitors’ responsibility to provide this evidence promptly. Had they done so sooner, we have no reason to doubt that Homes England would have approved it sooner. The fact that it delayed until it had the evidence was in line with Our Principles, and we are not critical of this.

Communication

35. Mrs O also complains that Homes England failed to provide any meaningful updates about her case from December 2020 to April 2021.

36. Mrs O frequently contacted both bodies throughout this period. From February to March, she contacted Target very frequently and sometimes multiple times per day chasing an update. The call notes indicate that Target first explained to Mrs O that the case needed to be referred to Homes England’s legal team in early December.

37. We can see that Target continued to advise her of this when she continued to chase for an update. In February Target advised that it could not provide a timescale. From this point onwards, each time Mrs O contacted Target it reiterated this and assured her it would chase Homes England to see if it could be expediated.

38. The records indicate Mrs O first contacted Homes England in early February via email to ask how long it would take to approve her application and express her frustration at how long it had already taken. She sent this email to the complaints department, and this was then treated as a complaint. Homes England responded three days later to confirm it would investigate her complaint.

39. Homes England emailed her the following day and explained that her case had been escalated to a Senior Manager. Mrs O then responded the next day and said that Target had advised her that the shortfall had been approved, but that Homes England’s legal team had some documents to finalise. Mrs O then chased this by sending Homes England a further seven emails in February requesting updates and expressing her frustration. Homes England then responded in early March by referring her to a web page on its complaints process.

40. Mrs O then continued to send Homes England the same kind of emails on three occasions in March. Homes England responded to advise its investigation into her complaint was still ongoing, and that her application was with its legal team. Contact between both parties seems to have ceased from this point until the middle of April, until Mrs O emailed Homes England explaining that her solicitors had sent the Memorandum of Sale and Mortgage Redemption statement in early April.

41. Our Principles of Good Administration state that public bodies should aim to ensure that customers are clear about their entitlements; about what they can and cannot expect from the public body; and about their own responsibilities.

42. We recognise this experience was not ideal for Mrs O. We also recognise she was very eager for either body to provide her with a definite timescale for how long she could expect to wait for Homes England’s decision. Unfortunately, neither body was able to provide this timescale, and we understand why this was frustrating for her.

43. However, for the reasons we have already covered, there was no timescale for either body to relay to her. Cases such as Mrs O’s were handled on an ad hoc basis by Homes England’s legal team. When we consider this alongside the pressures facing Homes England at this time, it is easy to see why neither body was able to provide this timescale.

44. We consider that Target, following liaison with Homes England, made Mrs O suitably aware that neither body could provide a timescale quite early on into this process in February 2021. Therefore, both bodies made her aware of what she could and could not expect from the process throughout this period of communication. The situation at hand was that there was no agreed timescale for novel cases like Mrs O’s for the reasons we have already covered.

45. This was in line with Our Principles, and so, while again emphasising that we recognise how frustrating this was, we are not critical of how either body updated Mrs O on her application.

1. We recognise how distressing it was for Mrs O having no idea when, or if, Homes England would approve her application. We also recognise that this ambiguity was made all the more distressing due to her buyer repeatedly threatening to pull out. However, for the reasons outlined in what follows, we have not identified any failings by either body. Therefore, we do not uphold Mrs O’s complaint.