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Local Authority Housing Loans

CHAPTER 1 INTRODUCTION

Introduction

My primary objective as Ombudsman is to examine and provide redress for justified complaints from individual citizens against certain public bodies. A secondary aim is to suggest or recommend improvements to administrative systems so that the same or similar mistakes are not repeated.

All organisations which provide services to the public have a responsibility to establish systems which ensure that their clients are given an adequate level of service. In one case which I dealt with in 1998 a complainant called into the offices of Meath County Council to establish how much it would cost to redeem his housing loan.

He was informed that his account had been paid in full since March 1996 and that, in the meantime, given that he had continued to pay the monthly loan instalments, a credit balance of �683.98 had accumulated on his account which had not been refunded to him. Had he not contacted the Council about the matter he might have continued paying his fully paid loan, indefinitely.

I was concerned that this might not have been an isolated incident so I asked the Council, and subsequently, the Department of the Environment and Local Government to examine the matter further. On receipt of the responses from the Department and the Council, I decided to exercise my power to initiate an investigation across all housing authorities.

In summary, my investigation has revealed

• 6,411 accounts,
• involving refunds of approx. �547,000,
• ranging from �1 to approx. �3,500 in individual cases,
• one local authority made refunds totalling �122,823,
• seven local authorities reported no overpayments,
• one local authority had a credit balance remaining on an account for almost 19 years and
• one borrower made 46 consecutive monthly instalments on a fully paid up loan.

My Report includes a breakdown of the above details for each local authority together with findings and recommendations to ensure that this type of complaint does not recur.

Kevin Murphy June 2000

Housing Function of Local Authorities

The housing function of local authorities is, to a large extent, determined by statute. The principal pieces of legislation are the Housing Acts of 1966 and 1988. The housing activity of local authorities may be divided into two broad areas:

• the direct provision of housing for persons who are unable to provide their own accommodation and
• assistance to persons purchasing or improving their own dwellings.

Houses are sold by local authorities in accordance with the provisions of Section 90 of the Housing Act, 1966, as substituted by Section 26 of the Housing (Miscellaneous Provisions) Act 1992. Housing Authorities are responsible for the promotion and administration of the Tenant Purchase Scheme in their areas. All tenants who apply to purchase their houses are given assistance by housing authorities to enable them to decide on the purchase option suitable to their circumstances.

Existing tenant purchase arrangements make possible the purchase of dwellings by tenants at prices that are far below the current market value of the dwellings. The case for encouraging tenant purchase is two-fold. On the one hand, it is desirable on general social grounds that as many people as possible should own their dwellings and, on the other hand, the saving in public authority maintenance costs when a house is purchased by a tenant is a positive factor.

The majority of people acquire their homes by taking out a mortgage loan. This represents a major long term financial commitment and it is important, in terms of promoting home ownership, that appropriate safeguards exist. The Consumer Credit Act, 1995 consolidated and considerably expanded consumer legislation in relation to mortgages. Among the other safeguards, the following apply to all mortgage lending institutions:

• the borrower has the right to repay the mortgage early, without having to repay a redemption fee (except in the case of fixed interest rate mortgages)
• a mortgage lender has to provide the loan applicant with a copy of the valuation report on the house being purchased,
• the mortgage lender has to state the total cost of the mortgage credit.

In addition, Section 130 of the Consumer Credit Act, 1995, which came into operation for local authorities in September 1997, provides:

• A mortgage lender shall in respect of a housing loan, issue to the borrower:

(a) at the time the loan is made, or as soon as may be practicable thereafter a copy of the mortgage deed (including any contract relating thereto) which copy shall be additional to any copy of such mortgage deed issued to his legal representative, and

(b) a statement of the total amount outstanding on the loan on a specified date occurring not more than one year after the making of the loan and at intervals of not more than one year thereafter until the loan is fully repaid, such statement being issued as soon as practicable after the date specified.

The above provisions ensure that the borrower is fully informed about his/her mortgage details.

The Local Government Computer Services Board (LGCSB):

The function of the LGCSB is:

• to organise, administer and provide or arrange the provision of a service for the supply of computer facilities for local authorities,
• to co-ordinate and secure compatibility in the usage of computers by local authorities generally, with a view to securing the most effective use of available resources and in matters related to its function to:

• provide or arrange the provision of training and education,
• carry out, promote or assist in the carrying out of research , and
• furnish advice, information and assistance to the Minister for the Environment and Local Government and to local authorities.

The LGCSB identifies many ways in which information technology can improve the quality of local authority performance including:

• better record keeping and access to information, leading to better decision making,
• cost savings, better cash flow and management, reduced costs, better cost estimates and better cost control through timely reporting.

The LGCSB is not within the jurisdiction of the Ombudsman but it is necessary to refer to it in this report because of the computer services it provides to most (but not all) local authorities whose computerised financial reports are referred to in this investigation.

Ombudsman's Powers and Jurisdiction

My powers and jurisdiction, as Ombudsman, are set out in the Ombudsman Act, 1980 (as amended). In the normal course, I do not investigate a complaint unless certain specific criteria are met. Normally, there will be a complainant who claims to be adversely affected by an action of a public body listed in the Ombudsman Act, 1980 as being a body subject to investigation by the Ombudsman.

Following a preliminary examination of the case, it must appear to me that the action complained of has, or may have, adversely affected the complainant and that the action involved maladministration. In this regard, Section 4 of the Ombudsman Act, 1980 sets out a range of headings which help to determine whether or not there has been maladministration. I must decide whether the action complained of was, or may have been -

• "(i) taken without proper authority,
• (ii) taken on irrelevant grounds,
• (iii) the result of negligence or carelessness,
• (iv) based on erroneous or incomplete information,
• (v) improperly discriminatory,
• (vi) based on an undesirable administrative practice, or
• (vii) otherwise contrary to fair or sound administration."

In addition, I have the power under Section 4(3)(b) of the Act to investigate, on my own initiative, instances of maladministration, without the need to have received a specific complaint.

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