‘Up to 37,000 tenants overcharged on their water bills’ say lawyers who exposed deal between council and Thames Water

News Desk (10 March, 2016) Housing

Southwark Council has said it is disappointed with the judge’s decision after resident takes them to court

8226Cartoon by Christian Adams

 

UP to 37,000 council housing tenants may have been overcharged by Southwark Council for their water bills, lawyers have claimed.

The ruling was made in a dispute at the Royal Courts of Justice between the council and Camberwell resident Kim Jones. The case concluded on March 4 with the judge’s decision that Miss Jones has been overcharged by 22.1 percent on her weekly water bills since 2006.

The council is legally entitled to collect payment from tenants for water and sewage services provided by Thames Water, and it is also allowed include a fee for the administrative costs it incurs while providing this service for Thames Water. But the judge, Mr Justice Newey, concluded that Southwark Council had breached the rules laid out by the 2006 Water Resale Order, as it had “bought and re-sold water and sewage services” to its tenants while making a profit. Because of the excessive fee the council charged, the judge said it had not acted as a “true agent”.

Southwark Council had therefore charged Miss Jones, and potentially the 37,000 tenants it charges under the same policy, more than the maximum allowed under the 2006 Order.

Councillor Richard Livingstone, cabinet member for housing, has issued a statement saying the council is “disappointed” with the judge’s decision, and have not ruled out appealing the case. “Southwark Council (along with many other council landlords and housing associations) has been providing a service to Thames Water by billing tenants for their water, and collecting their payments,” Cllr Livingstone said.

“We have received a commission to cover our administration costs and the risk of non-payment, and any surplus has gone back in to the housing revenue account which pays for improvements to tenants’ homes and investment in new homes.”

Gareth Mitchell of Deighton Pierce Glynn, the solicitor firm representing Miss Jones, told the News that Southwark Council had been able to overcharge residents because of an agreement held with Thames Water.

Mr Mitchell said: “Thames Water and Southwark Council entered into a confidential agreement behind closed doors which none of the tenants who have been affected knew was happening. We only found out about this after obtaining a court order that they disclose the agreement. “The courts decided approximately 37,000 households had been overcharged,” he said.

He added that Southwark Council was likely to have evicted former residents who had fallen into “water arrears” on added charges they were not liable to pay. “Southwark Council often evicts either wholly or in part because of water arrears. In the past people would have lost their homes because of charges they were not in fact liable to pay,” Mr Mitchell said.

“We are still considering the best way of giving effect to the judgement. The most pressing concern for us is that Southwark Council has charged in breach of consumer protection rules.

“Tenants who think they have been overcharged maybe entitled to a rebate, but how Southwark Council will go about redressing this situation is up to them. We would urge anyone who is having difficulty with rent arrears to seek urgent advice and I’m quite keen to hear from other Southwark tenants who have been affected by this.”

Mr Mitchell also slammed Cllr Livingstone’s,  accusing him of repeating the same argument in his statement that he had been rejected by the high court judge.

A Southwark Council spokeswoman has clarified that Cllr Livingstone would like to maintain his line of argument, as the council still disagrees with the high court judge’s ruling.

A spokeswoman for Thames Water said: “London Borough of Southwark bill and collect water and waste water charges from their tenants on our behalf. We are aware of the recent court case regarding this arrangement and are reviewing the judgement.”

 

How does it work?

The deal between Southwark Council and Thames Water allowed the council to collect payments for water and sewage services on the company’s behalf.

To provide this service to Thames Water, the council also incur administrative costs, which it then includes in bills it charges to tenants living in council homes.

This, the council says, is why Miss Jones’s bills were 22.1 per cent more than the basic costs of the services. But the dispute is whether Southwark Council charged a higher fee to their tenants than this administrative cost amounts to.

Southwark Council disagrees with the judge’s ruling because they say that it would be at a loss if it didn’t cover itself for these administrative charges, and that they charged a fair amount.

“We haven’t benefited from this arrangement, and tenants haven’t suffered any cost – they have paid exactly what Thames Water calculated they would have paid if they’d had a direct relationship with them,” Cllr Livingstone said.

“If the council terminates the relationship with Thames Water, tenants will be charged exactly the same as they are now but will be responsible for sorting out their own water bill, and there will be a financial loss to the council’s HRA of £2.3m, which will have a detrimental impact on service provision.”

Rob Kenyon says:

Why is the water rate included in the rent anyway? It means that tenants who regularly pay their rent could be evicted for refusing to pay exorbitant water rates.

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