Bank of Scotland plc trading as Halifax · DRN-6152212

The complaint Mr D complains that Bank of Scotland plc trading as Halifax paid service charge arrears to the freeholder of his property without his consent. What happened On 9 April 2021, Halifax wrote to Mr D saying his freeholder had been in contact and was requesting it pay outstanding service charge and ground rent arrears. It said Mr D needed to pay £8,839.88 within 21 days to the freeholder as his lease was at risk. This letter asked Mr D to get in touch if he disagreed with the amount claimed and said if it didn’t hear from him by 30 April 2021, it would pay the outstanding arrears. On 15 April 2021, the solicitors acting for the freeholder wrote to Halifax to say it was looking to take court action imminently to recover the arrears which may result in the lease being forfeited. On 29 April 2021, the solicitors acting on behalf of the freeholder wrote to Halifax asking it to make payment of £8,839.88 and provided a breakdown of what was owed which included service charge arears and costs. This payment was made on 7 May 2021. Mr D complained about this in 2025 saying it wasn’t fair or reasonable that Halifax had made this payment. He questioned the amount paid, said no affordability assessment had been carried out before adding it to the loan, and that it had continued to attract interest. Two of our Investigators have considered the complaint, neither thought it should be upheld. Mr D didn’t accept this. He said it wasn’t fair and reasonable in all the circumstances for Halifax to pay the service charge and apply it to his mortgage account with the long-term interest consequences that followed. The complaint has been passed to me to make a final decision. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Mr D has submitted his complaint to us in detail, raising many points and issues. I’ve thought about everything he’s said and read everything he’s provided us with. I won’t address each and every point he’s raised. Instead, I’m going to focus on what I consider to be the crux of this complaint – that Halifax has paid a service charge on his behalf and added it to his mortgage. This reflects the informal nature of our Service. I also note that Mr D has told us what he wants us to ask of Halifax, and various actions he wishes us to undertake. We don’t take directions from either party when investigating a complaint. It’s for us to decide what the crux of the complaint is, and address that. I’m satisfied that I can reach and outcome that is fair and reasonable in the circumstances, based on the evidence we already have. So, I haven’t asked any further questions of Halifax.

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A condition of most leasehold property is that ground rent and service charges are paid to the freeholder. Non-payment of these charges can result in the forfeiture of the lease. Halifax is entitled to take steps to protect its charge over Mr D’s property, and its charge would be at significant risk if the lease were forfeited. The term Halifax has relied on within its terms and conditions can be found within Chapter 3 – Our charges and our costs. This says, insofar as is relevant to this complaint: What are costs? … You might have to pay a cost because of something you ask for or because you do not keep to your obligations under the agreement. You will only have to pay for a cost of ours as far as the cost is reasonable. It wouldn’t be possible to list every type of cost, but some common examples are: … • The costs of us having to make payments to other people because you have not met your obligations to do with your property, for example, if we pay a service charge where you have failed to do so. This same section goes on to say: What happens if we add a charge or cost to your mortgage loan If we add a charge or cost to your mortgage loan, we may charge interest on it. Based on this, I’m satisfied Halifax is entitled to add these costs to Mr D’s mortgage and that this cost will be interest bearing. Mr D has referenced the fact that Halifax didn’t carry out an affordability assessment before adding this amount to his mortgage. The rules that govern mortgage lending and affordability checks are known as MCOB and can be found within the Financial Conduct Authority handbook. Whilst MCOB does have rules regarding affordability checks that must be undertaken when additional lending is granted, this situation is different. MCOB doesn't require an affordability assessment in this situation where Halifax is taking steps to protect its security as its terms and conditions allow it to. Had adding these costs caused Mr D financial difficulty, I’d expect Halifax to have considered all forbearance options available to it, as I would any time there is financial difficulties. But I’ve seen nothing to suggest Mr D got in touch with Halifax to raise this. Mr D said that Halifax wrote to him at an incorrect address when it first told him of its intentions to pay the service charges. However, it wrote to him at the address he had provided it with. Until he changed his address with Halifax, two years later, Halifax wouldn’t have known that he wasn’t receiving this correspondence. So, I’m satisfied it was right to send correspondence to this address. As it didn’t receive a response, it paid the service charge, and I don’t consider this unreasonable. Mr D has said Halifax didn’t request any further information from the solicitors acting for the leaseholder demanding payment. He said there was no evidence of imminent forfeiture of the lease. However, Halifax didn’t need to do this. It gave Mr D the chance to challenge it making the payment if he wanted to. He didn’t, so I think it was reasonable for Halifax to

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assume there was no dispute and it made the payment. I don’t consider this unreasonable in the circumstances. There was no further requirement for Halifax to test or challenge what it was being asked by the solicitors. I’d also note that Halifax had paid service charges on Mr D’s behalf before. Mr D has talked about discrepancies in the amount paid by Halifax, the amount requested, and the amount sent to the leaseholder by the solicitors. I can see that the amount of £8,839.88 was the amount the solicitors requested, the amount Halifax paid, and the amount it added to Mr D’s mortgage. If Mr D believes there is a discrepancy, I don’t believe this is due to anything Halifax has done. So, he will need to take this up with either the leaseholder, or the solicitors acting on their behalf. Mr D has referenced the setting up of a sub-account on his mortgage which these (and other) charges and fees are added to, rather than the two accounts that show Mr D’s borrowing. It’s not unusual for a lender to have a sub-account where charges and fees are held separately from the main mortgage balance. It incurs interest in line with the rest of the mortgage balance, and doing this hasn’t caused Mr D any financial loss. Whilst I recognise Mr D feels strongly about this matter, I don’t think Halifax has made a mistake in its handling of this situation. So, I’m not going to ask it to take any further action. My final decision I don’t uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr D to accept or reject my decision before 21 April 2026. Rob Deadman Ombudsman

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