Openwork Limited · DRN-6200787

The complaint Mr and Mrs B complain that an appointed representative of Openwork Limited trading as The Openwork Partnership gave them poor advice and recommended that they take out an unsuitable mortgage. What happened Mr and Mrs B initially contacted Openwork for advice in 2021. They wanted to move home. In July 2022 they found a property they wanted to buy and let Openwork know. They say they told the adviser that there were two properties on the land they were buying – the main house and a cottage which they intended to use as a short-term holiday let, both on the same title, and they needed a suitable mortgage for this situation. Openwork recommended a mortgage on a ten-year fixed interest rate of 3.99%. Mr and Mrs B went ahead with that recommendation, and the mortgage and purchase completed in March 2023. Mr and Mrs B say they understood that the mortgage would allow them to operate the second property on the land – a cottage – as a holiday rental. In June 2024 they had finished renovating the cottage and were ready to let it, so on 26 June 2024 they asked their mortgage lender for permission to let. The lender wouldn’t give permission and said it doesn’t allow holiday lets for any of its residential mortgages. That’s its policy. Mr and Mrs B complained to the lender and then to Openwork. The lender wouldn’t change its position. Openwork sent Mr and Mrs B its final response to their complaint on 31 October 2024. It accepted that the advice it had given them was unsuitable given that Mr and Mrs B had told it about their intention to use the cottage as a holiday let. It apologised, paid them £250 for inconvenience, and said it would need more information because redress would be complicated. By mid-December 2024 Openwork still hadn’t made a further offer of compensation despite multiple emails and phone calls with Mr and Mrs B. Mr and Mrs B decided that things were taking too long, so they asked us to look into their complaint. They said that every month the cottage can’t be rented out it costs them £300 to keep empty, and if it were let they would cover those costs and receive profit from it. They wanted a mortgage that would allow them to let the cottage as they had always intended. In February 2025 Mr and Mrs B completed on a new mortgage with another lender which would allow them to run the cottage as a holiday let. They took a five-year fixed interest rate product at 4.29%. They paid an early repayment charge (ERC) of just over £15,000 to their previous lender, a £50 mortgage exit administration fee, and a £30 CHAPS fee. Openwork paid these charges, plus a further £1,200 for Mr and Mrs B’s non-financial loss, on top of the £250 it had already paid them. In February 2025 it said it would also pay the difference in interest between the mortgage product Mr and Mrs B would have chosen in

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February 2023 had they been given the right advice and the interest on the mortgage they took with their new lender in 2025. Following our involvement, Openwork said it didn’t think Mr and Mrs B’s new mortgage would cost them more over the term of the fixed interest rate, so it didn’t make any further offer of compensation. Mr and Mrs B didn’t agree with that. Our Investigator recommended that Openwork pay Mr and Mrs B £4,400 on top of the compensation it had already paid, to reflect the rental income they had lost because they didn’t have a mortgage which allowed them to let the cottage until March 2025. Openwork didn’t accept that recommendation. It said Mr and Mrs B had accepted its offer of compensation in full and final settlement of their complaint in February 2025. It also said that it thought Mr and Mrs B would only have their lender’s consent to let the property for a maximum of 90 days a year, and it didn’t accept that the property would have been let for the full eight months between July 2024 and February 2025 for which it understood the Investigator had recommended compensation be paid. The complaint was referred to me to decide. I reached a different conclusion to our Investigator about how it should fairly be resolved, so I issued a provisional decision. My provisional decision I said: “Openwork has accepted that it made an unsuitable recommendation to Mr and Mrs B. It knew that Mr and Mrs B wanted to run a holiday let at their new property, but it recommended a mortgage with a lender which didn’t permit holiday lets and which confirmed that in the online information it made available to intermediaries. The only remaining matter for me to decide is therefore how Openwork’s mistake should fairly be put right. Openwork has refunded the ERC and other charges Mr and Mrs B paid to end the mortgage it recommended early. It has also refunded the broker fee they paid it for its advice and paid them £1,450 for the non-financial impact on them of what happened. It has said it doesn’t think it should pay any more and in any event Mr and Mrs B accepted its offer to settle their complaint in February 2025 – so they can’t seek further compensation now. I’ve looked carefully at what has happened. On 18 February 2025 Openwork wrote to Mr and Mrs B with its offer of compensation. It said it was offering: “1. An amount to cover the Early Repayment Charge you will incur when coming out of your existing mortgage (including additional charges totalling £80): £15,254.60. We will pay this direct to your conveyancer. 2. A refund of the broker fee paid of £395, to be paid to your nominated account (see below). 3. The difference in interest between the product you would have selected in February 2023 and that of the current and future [name of new mortgage lender] mortgage. When your new mortgage has completed please provide details of the mortgage and we will run the relevant calculation and make an additional offer of redress.

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4. I am very sorry that it has taken longer than we anticipated in reaching our conclusion and, in recognition of the distress and inconvenience caused by this delay and the initial error with your mortgage, I would like to offer a payment of £1,200 to be sent to your nominated account (see below). Please note that acceptance of this payment will not jeopardise any referral that you may subsequently make to the Financial Ombudsman Service in relation to your complaint.” Mr and Mrs B said they considered this reasonable in principle, although they wanted Openwork to calculate how much it would pay them for the extra interest they would have to pay on their mortgage. They were also worried that Openwork wouldn’t pay the ERC for them in good time – and without that payment they wouldn’t be able to complete on their new mortgage – so on 20 February 2025 they signed a form accepting Openwork’s offer. The form said: “Once the final mortgage loss has been calculated, we understand that this offer is made in full and final settlement of our claim against Openwork and any of its representatives in relation to complaint [complaint reference]”. Openwork has told us that it was only acceptance of the £1,200 part of its offer that wouldn’t jeopardise any referral Mr and Mrs B made to us, but this didn’t apply to the rest of its offer. I think however that if that was Openwork’s intention then it should have made that clear. I don’t think it was clear, and Mr and Mrs B clearly didn’t understand that, if they accepted the offer, Openwork would take the view that they couldn’t continue with their complaint (which by February 2025 they had already referred to us). And they had to accept it in order to proceed with the new mortgage with the new lender, because they needed Openwork to cover the ERC in order to afford the new mortgage. For these reasons, I don’t agree with Openwork’s argument that no further award should be made because Mr and Mrs B signed to accept its offer in February 2025. When something has gone wrong, our approach is to try – as far as possible – to put the complainant back in the position they would have been in had nothing gone wrong. If nothing had gone wrong and the adviser had given Mr and Mrs B the correct advice, he would have recommended a suitable mortgage product and a lender which would have allowed them to let the holiday cottage. Mr and Mrs B could then have decided whether to accept that recommendation. They have told us that they may have decided not to go ahead with the move at all if a 3.99% ten-year fixed rate wasn’t available to them at the time of the advice in 2023, because they would have been worried about whether they could afford to pay a higher rate of interest on their mortgage. Things however appear to have worked out for Mr and Mrs B – they haven’t said anything to suggest they’re in financial difficulty, and they were able to reduce the term of their mortgage when they remortgaged in early 2025. In any event it would of course not now be possible to unwind their move. Openwork recommended the mortgage with the lowest available fixed rate in February 2023. Mr and Mrs B were happy with the rate – ten years fixed at 3.99% - and they only had to remortgage elsewhere because the lender wouldn’t allow holiday lets. In February 2025 they remortgaged to a different lender which would allow holiday lets, but on a higher rate of 4.29%, fixed for five years. They want Openwork to cover the difference in the two rates. I understand Mr and Mrs B’s point. But the mortgage they got in February 2023 is not the mortgage they would have had if Openwork hadn’t made a mistake. They could never have taken that mortgage, because the lender offering it would never have allowed them to let the cottage. In order to put things right fairly, I have to decide what is

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most likely to have happened had nothing gone wrong. Here, that means looking at what mortgage deals were available in February 2023 that would have fitted Mr and Mrs B’s requirements. Mr and Mrs B’s situation wasn’t straightforward. They needed a lender which would agree to the holiday let and also to lend on a property in their particular part of the country, where some lenders won’t lend. Mr and Mrs B have pointed to three lenders other than the one Openwork recommended which had a 3.99% ten-year rate available. Openwork has asked all three lenders about their policies on allowing holiday lets and I’ve seen their responses. All three have said they wouldn’t have agreed to holiday lets. The available evidence persuades me that Mr and Mrs B couldn’t have got a ten-year fixed rate product of 3.99% which met their needs through Openwork in February 2023. I must also keep in mind that Openwork is a restricted advice network, which means it didn’t have access to the whole mortgage market when it advised Mr and Mrs B. Openwork has said that if it hadn’t made a mistake – that is, if it had made a suitable recommendation – it would have recommended a five-year fixed rate at 4.28% with the lender Mr and Mrs B have since remortgaged to. It has provided the list of mortgages and lenders from February 2023 to support this. I accept what Openwork has said. The 4.28% five-year fixed rate was the next cheapest fixed rate, the lender would lend on properties in the area where Mr and Mrs B live and allow holiday lets, and was a lender Openwork could source mortgages from. This rate is 0.01% lower than the rate Mr and Mrs B are now paying. But they paid interest at 3.99% for around two years before they remortgaged, so they have made an interest saving rather than a loss when calculated over five years from March 2023. Openwork has calculated that saving to be £1,095, and having considered its calculations I think that’s about right. I’ve noted Mr and Mrs B’s point that they could have chosen a rate around 0.2% lower in early 2025 but didn’t do so because that deal was subject to a product fee which Openwork hadn’t agreed to cover. I think that taking this into account they still haven’t lost out overall given that they were paying interest at the lower rate of 3.99% for around two years. I’ve also considered the product fees payable for the 3.99% ten-year rate and the 4.28% five-year rate. They are similar – £995 and £1,025 respectively – so I don’t propose to make any award for fees. I turn now to the losses Mr and Mrs B incurred because they didn’t have their lender’s consent to let their holiday cottage. I’m satisfied that they have lost out in terms of rental income and in terms of some of the running costs of the holiday property, and that Openwork should compensate them for that. Mr and Mrs B were ready to begin letting the property in July 2024. They had finished refurbishing it and they had received the permit they needed to operate a short-term holiday let at the end of June 2024. That’s when they asked their lender for permission and found out that it wouldn’t agree to holiday lets. It wasn’t until the end of March 2025, when they had the new mortgage, that they could begin letting the property. They therefore lost income and had to pay some additional running costs for the cottage for around nine months between July 2024 and March 2025. I find that these losses arose as a direct result of Openwork’s unsuitable advice and that Openwork should therefore compensate Mr and Mrs B for them. Openwork has said that Mr and Mrs B’s current mortgage lender doesn’t allow holiday lets for more than 90 days. I agree that is the case where a borrower doesn’t first obtain the lender’s permission. Mr and Mrs B did however get permission from their lender,

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which allowed them to let for more than 90 days. Their licence to let the property issued by the local council also has no restrictions on the number of days they can let. Mr and Mrs B have provided details of the bookings they had for the holiday let from March to October 2025. These show that they had a total of 110 completed days let during that period, which generated £9,812.47 in income. However, this period includes the late spring and early summer months in 2025; the cottage wasn’t ready to be let during the equivalent period in 2024. Mr and Mrs B have said that they also always planned to be closed during the winter months, and in the most recent year they didn’t accept bookings for the period between the beginning of October 2025 and late March 2026. In the circumstances I find I can’t reasonably conclude that Mr and Mrs B would have received a similar level of income from their holiday let between July 2024 and March 2025 as they did in the first nine months of successfully letting the cottage between March and November 2025. The two periods aren’t equivalent, given that it seems likely they would have closed for the winter months in late 2024 and early 2025 as they did in late 2025 and early 2026. It’s not always possible to quantify loss precisely, and I think that’s the case here. I consider the fairest approach is to pro rata the income Mr and Mrs B received from the holiday let for the six months they were open between April and September 2025 inclusive, for the three months the holiday let should have been available between July and September 2024 inclusive. I therefore propose to direct Openwork to pay Mr and Mrs B half of the £9,812.47 they received from letting the property in 2025 – that is, £4,906.24 – because they were unable to let it sooner due to Openwork’s mistake. I also think Mr and Mrs B incurred additional costs which they wouldn’t otherwise have incurred because the property couldn’t be let sooner. I understand that the council tax charge for the cottage was doubled while it wasn’t let, because it was considered a second home. Mr and Mrs B have since qualified for business rates, on which they get 100% relief, but they aren’t eligible for a refund of council tax for the period the holiday let couldn’t operate, which came to just over £1,300. Mr and Mrs B paid £263 for a short- term let licence, valid for three years, but couldn’t use it for nine months. They paid just over £300 for internet at the cottage for nine months unnecessarily. They also arranged to insure the cottage separately sooner than they needed to, at a cost of around £50 a month. Energy costs would always have been payable, and I note that Mr and Mrs B don’t charge customers separately for energy – it’s included in the cottage rental cost. So I don’t propose to make any award for those. In making my award I must however take account that Mr and Mrs B have been out of pocket for some time and they should also fairly be compensated for that. In all the circumstances, I provisionally consider that £7,750 is a fair and reasonable award of compensation for Mr and Mrs B’s costs and losses, on top of the amounts Openwork has already paid. I don’t intend to make any deduction from that sum for the interest saving Openwork thinks Mr and Mrs B made as a result of having paid a rate of 3.99% on their mortgage for around the first two years. I think this is offset by the delay in their remortgage to their new lender because of the uncertainty about whether Openwork would cover the costs, at a time when interest rates were increasing.

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Finally, I think Mr and Mrs B have experienced considerable upset and inconvenience as a result of Openwork’s mistake. Openwork has however already paid them £1,450 for non-financial loss. I think that’s fair and reasonable so I don’t intend to make a further award for this.” I invited Mr and Mrs B and Openwork to let me have any further evidence or comments they want me to consider before I make a final decision. Mr and Mrs B accepted my provisional decision, but Openwork did not. It asked for copies of the evidence Mr and Mrs B had provided to us of their costs and losses and queried the amount of compensation I proposed to award. 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. Having done so, I’ve reached the same conclusion I set out in my provisional decision, for the same reasons. I remain of the view that Mr and Mrs B should fairly be compensated for the losses they suffered because Openwork advised them to take out an unsuitable mortgage. I also remain of the view that the fairest and most reasonable way of doing that in all the circumstances is as I set out in my provisional decision. I’ve thought carefully about Openwork’s further comments. I’ve also noted that it hasn’t suggested an alternative approach to calculating compensation, either in response to Mr and Mrs B’s complaint to it or in response to my provisional decision, even after our Investigator sent it the relevant evidence of Mr and Mrs B’s losses and costs which I took into account in making my provisional decision. Openwork has asked for a precise breakdown of the award I proposed to make. I explained in my provisional decision that it’s not always possible to quantify loss precisely and that I considered that to be the case here. I haven’t changed my mind about that. It can’t be established with certainty exactly how much rental income Mr and Mrs B would have received and exactly when they would have received each payment. As I said in my provisional decision, I must also take into account the time for which Mr and Mrs B have been out of pocket. The Financial Ombudsman Service’s usual approach is to award simple interest on these types of losses from the date of loss to the date compensation is paid. In this case, that interest would be at an annual rate of 8%. However, the nature of Mr and Mrs B’s losses means that this calculation can’t be done. In proposing that Openwork pay Mr and Mrs B £7,750 to settle this complaint, I also explained that: - I took account of the fact that Mr and Mrs B were unable to use nine months of their three-year short-term let licence but were able to use the remainder; - I wasn’t making any award for the cheaper mortgage Mr and Mrs B said they could have taken in early 2025 but for Openwork’s refusal to cover the product fee; - I wasn’t making a deduction for the interest saving Openwork had argued Mr and Mrs B made because they paid a lower rate on the mortgage for around the first two years; - Openwork had already paid compensation for non-financial loss which I considered to be fair and reasonable, so I didn’t intend to make a further award for that.

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I don’t think it was unreasonable for Mr and Mrs B to have arranged to insure the holiday cottage in preparation for letting, before they found out about Openwork’s unsuitable mortgage recommendation, and then to have continued with the policy in anticipation of arranging a suitable mortgage quickly. Mr and Mrs B have also explained, and I accept, that having appropriate insurance was a condition of their letting licence. Following Openwork’s query about whether Mr and Mrs B would have paid tax on the rental income they lost out on, Mr and Mrs B have provided copies of invoices for some of the set-up and maintenance costs of the holiday cottage, which would have more than offset their rental income. They have said that they wouldn’t therefore have been liable for any tax on rental income for the 2024-2025 tax year. I see no reason not to accept this, and Openwork hasn’t commented further about this since our Investigator relayed Mr and Mrs B’s position to it. Finally, I understand Mr and Mrs B’s strength of feeling and that they simply want this long-running matter resolved – but Openwork was entitled to make further comments in response to my provisional decision. I’m not therefore making any further award for what Mr and Mrs B see as Openwork’s continuing obstructiveness. My final decision My final decision is that I uphold this complaint and I require Openwork Limited, trading as The Openwork Partnership, to pay Mr and Mrs B £7,750, in addition to what it has already paid. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr B and Mrs B to accept or reject my decision before 8 April 2026. Janet Millington Ombudsman

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