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Water service charges…

…another leak for Housing Associations already dwindling purse?

It is not unusual for Housing Associations (“HA”) to have private arrangements with utility providers for the supply of water and sewerage. In return for the HA collecting the water charges on the utility providers behalf (and bearing the risk of bad debts) via a service charge, they are given a discount on the global invoice for all their non-metred properties.  The balance is then put into the HA’s Housing Revenue Account.  This arrangement has now been challenged in the recent case of Jones v London Borough of Southwark [2016] as being a breach of The Water Re-Sale Order 2006 (“the Order”).
The Order restricts the amount a purchaser of water can charge to the end user so that they may only charge a moderate administrative fee unless, as the Council tried to argue in the above case, they were an agent and not a purchaser of water – the Court disagreed.
The implications of this decision means that tenants could claim for overpaid water charges going back six years (limitation of claims) should a Court rule that the HA is a purchaser of water.  Clearly, for those HA’s with a large portfolio of tenants, this kind of arrangement could prove to be expensive.  In addition, tenants with large rent arrears may be able to offset the overpaid water charges, which could lead to possession claims being unfounded.
Where does this leave HA’s? Abandon such agreements and lose a significant sum of income to their Housing Revenue Accounts or review their tenancy agreements and current agreements with the utility providers to ensure it is clear the HA is an agent.
Sadly, if HA’s decide to err on the side of caution and cancel such arrangements with water suppliers.  The reduction in income is inevitably going to effect the service HA’s can provide.
For further advice please contact Emma Oliver.