Water charges levied with rent and the agent / re-seller distinction
We look at three cases here which dealt with agreements between social landlords and water companies whereby the landlords collected water and sewerage charges as part of the rent.
The question was whether the landlord acted as agent or re-seller of services, the distinction being significant because re-sellers are limited as to how much they can charge under The Water Resale Order 2006.
Rochdale Borough Council v Dixon  EWCA Civ 1173
This was a possession claim based on Dixon's failure to pay water charges. RBC had an agreement with United Utilities Water Limited under which the water company would inform it of charges annually. RBC would pay and then collect those charges from its tenants. RBC received a commission from the water company, but this was justified on the basis that they took the risk of some tenants failing to pay. Dixon argued that this was not simply an agreement for collection of charges because RBC took the risk of non- payment. Dixon also argued that RBC was not acting as agent but levying the charges itself.
Despite RBC taking on some risk, the court held that the agreement was still an agency agreement. Even were this not the case, the water company was still fixing the water charges, and RBC was collecting charges on behalf of the water company. The court held that 'on behalf of' in the Local Authorities (Goods & Services) Act 1970 Act should be read more widely as meaning 'for the benefit of', and the agreement in this case satisfied that arrangement.
Jones v London Borough of Southwark  EWHC 457 (Ch)
Here Southwark had an agreement with the water supplier Thames Water whereby Southwark paid the water company a total sum for unmetered properties, and then collected water charges from its tenants with the rent.
Jones paid water charges to Southwark with the rent for her unmetered property. The agreement between Southwark and Thames Water stated that the person responsible for paying charges under the scheme was the occupier, but where the relevant property was let on a tenancy of less than 12 months, the owner was regarded as occupier and liable for charges. Southwark's tenancies were weekly periodic and so less than 12 months. Thames Water was therefore charging Southwark as owner, and Southwark in turn charging its tenants, so Southwark assumed responsibility for those charges.
The total sum paid by Southwark to Thames Water was rebated by 5% to take into account void properties and 18% as a commission. Southwark did not pass these reductions on to its tenants.
The court rejected Southwark's argument that this was an agency agreement. Instead the court held that Southwark was buying water and sewerage services from Thames Water and re-selling them to its tenants. Accordingly the 2006 Order applied and limited the amount Southwark could charge its tenants. Re-sellers are only allowed a small administrative charge and must pass on any reductions and discounts to their tenants. Southwark had charged Jones more than permitted under the 2006 Order. The wider implications of this are huge given the large number of tenants to which the same situation applies.
Rochdale Boroughwide Housing Limited v Izevbigie  EWHC 790 (Ch)
Heard as a preliminary issue, this case also dealt with the question of whether RBH, the social housing provider of what had been council housing stock, was agent or re-seller in respect of water charges made as part of the rent. Here, the relevant agreements were with United Utilities Water Limited.
Izevbigie's argument was that the definition of 'charges' in the agreements meant that RBH had accepted responsibility for paying those charges. However, the High Court, reading the agreements as a whole and in context (following Arnold v Brittan on interpretation of contract) held that the definition of 'charges' did not mean that RBH was being charged and re-selling services to its tenants. Instead it simply meant that United Utilities Water Limited was not charging the tenants directly. The rest of the terms of the agreements supported the notion that RBH was simply providing collection services for the water company.
The main distinction between Jones v Southwark and RBH v Izevbigie was that in the latter case RBH were not under a contractual obligation to pay for the services provided by the water company.
The implications of these cases are significant for all social landlords where tenancy agreements include a water charge within the payment section. In these circumstances it is advisable for those landlords to check the terms of their agreement(s) with the relevant water company to satisfy themselves that they are not an agent or reseller of services.