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Court of Appeal decision on Recovering Administrative Charges on Utility Costs

By Rawdon Crozier, KBG Chambers, Barrister and Ibraheem Dulmeer, Legal Adviser at LEASE

February 2018

This decision looked at whether park home owners were liable for the site owners’ costs of providing utilities.

In Greenwood and another v P R Hardman & Partners [2017] EWCA Civ 52, the Court of Appeal considered the extent to which park home owners are liable to pay the site owners’ actual or notional costs of administering and maintaining the utilities in addition to the actual charges for such services.

It was held that the liability to make such a contribution was governed by the terms of the written statement required by the Mobile Home Act 1983 (“the Act”) construed within the statutory framework of the Act and that, as it was highly improbable that such a written statement would include provision for the recovery as “charges”, of either:

  1. costs and expenses incurred by the owners themselves, or
  2. remuneration for the owners for work carried out by them,

such liability could only arise as part of the pitch fee.

The brief facts:

 The site in question, Shortferry Caravan Park, was owned by, Hardman, the Appellant site owner. It was a mixed used site comprising holiday and residential homes and touring pitches and a protected site for the purposes of the Act. In relation to the residential pitches, each was provided with a supply of LPG piped from a bulk tank, filled by an independent supplier whose charges, including the cost of renting the tank were met by Hardman.

The supply to the permanent pitches was individually metered at a unit cost set by Hardman to include a contribution towards the cost of providing gas to the communal areas, the costs incurred by Hardman in reading meters, tank rental, maintenance of the tank compound and underground pipes, an interest charge and a further administration fee.

The surcharges were significant. Between May 2008 and 2014, the unit cost to Hardman of LPG had varied between 34p per litre and 47p per litre, while that to pitch occupiers during the same period had been set at between 49p per litre and 71p per litre. Similarly in relation to electricity, the unit cost to Hardman varied between 2008 and 2014 had varied 9p per unit to 15p, while Hardman had charged the pitch occupiers between 12p and 28p per unit. In relation to sewerage, which was on private system, Hardman set a quarterly sewerage charge to include the cost of a permit from the Environment Agency, charges levied by a contractor for emptying the tanks, charges by a second contractor for servicing the tanks every quarter and the cost of electricity required to operate the system.

In the FTT, the applicants, who were occupiers of residential pitches, applied under section 4 of the Act for a determination as to whether (a) the costs charged for electricity, sewage and liquefied petroleum gas (“LPG”) were the responsibility of the residents; and (b) the residents were entitled “to recompense for site owners overcharging”.

The Decision of the First-tier Tribunal and Upper Tribunal:

 The FTT had regard to the following paragraphs contained in the written statement:

  1. To pay to the owner an annual pitch fee; and,
  2. To pay and discharge all general and/or water rates which may from time to time be assessed charged or payable in respect of the mobile home or the pitch and charges in respect of electricity, gas, water, telephone and other services.

The terms were in a form recommended by British Holidays & Home Parks Association and identical to those which had been considered in re Britaniacrest Ltd [2013] UKUT 0521 (LC) in which the Upper Tribunal had ruled that the express terms of the Pitch Agreement did not impose an obligation to pay administrative costs as a separate charge in addition to the pitch fee.

The FTT followed Britaniacrest, holding that, other than through their pitch fees, the applicants’ obligation to pay for those utilities excluded any service charge for the costs of LPG delivered to the pitches, the costs incurred by the owners in relation to the park’s private sewerage system and any administration charge for the supply of utilities.

On the site owners’ appeal and the applicants’ cross-appeal the Upper Tribunal, in part upheld and in part overturned the decision of the FTT.  It rejected Hardman’s case that the applicants were liable to pay a general service charge and held that the standard form agreement with each of the applicants was concerned solely with the reimbursement of specific outgoings incurred by the owner in meeting liabilities to third party service providers. On the basis of, essentially, a concession made by the occupiers, the UT held that the charges incurred by Hardman in paying third party contractors to licence, service and empty the sewerage system were recoverable as charges.

An article on the Upper Tribunal’s decision is available on the LEASE website.

The Court of Appeal’s decision:

 Counsel for the site owner sought to argue that the express provisions in the written statement permitted recovery, in particular; in paragraph 3(b) of Part IV of the agreement, “charges in respect of electricity, gas, water telephone and other services”. There was no reason to limit “charges” there to liabilities to third party providers (although it would also embrace such liabilities) and that the clause allowed by implication, the inclusion of a service charge.

This argument was rejected by the Court of Appeal, which upheld the UT’s decision and held that the “charges” were charges by third party utility suppliers and the “other services” were those provided by third parties in respect of third party utility supplies to the pitch. Payment for other third party contractors and for services undertaken by Hardman themselves was not recoverable under paragraph 3(b) and could only be recovered only as part of the site fee.

In rejecting the wider meaning of “charges” for which Hardman had contended, the Master of the Rolls, observed that such a meaning would was highly improbable without any express provision specifying limitations on what is recoverable by the owners and how the amounts charged by the owners could be challenged.

While the Act provided that the annually revised pitch fee had to be agreed with the occupiers or determined by the FTT, there was no mechanism for the review of charges. There was no inconsistency in applying the narrower meaning; the definition of pitch fee expressly “embrace[d]” maintenance of the common areas of the protected site and the site owner could potentially recover such costs in anticipation of their being incurred, subject to the pitch fee review process.

While there was no cross-appeal by the occupiers, the Court of Appeal expressly disapproved the UT’s decision that the charges incurred by Hardman in paying third party contractors to licence, service and empty the sewerage system were recoverable as charges. In future, all such costs and expenses might only be recovered under the pitch fee process.

Three Key Points to take from the Decision 

  1. A written statement is unlikely to be construed as allowing costs and expenses incurred by the owners themselves, or remuneration for the owners for work carried out by them, other than as part of the pitch fee.
  1. Service charges may, however, as a matter of construction, be imposed in park home agreements if the agreements clearly provide for this. Two subsidiary points arise from this:
  • the importance of reading agreements carefully and obtaining legal advice if there is any uncertainty as to their implications cannot be overstated; this applies both to site owners and occupiers
  • whether a term which permitted the recovery of service charges over and above pitch fees might be capable of being challenged (varied or deleted) under s.2 of the Act is not something that fell to be considered but, if the term failed to provide a review mechanism for such charges, the tenor of this decision could be used in support of such a challenge.
  1. The pitch fee process may allow an increase to reflect a service charge element where there is a proper consultation for the purposes of obtaining such an increase.

This article is not meant to describe or give a full interpretation of the law; only courts or tribunals can do that. If you are in any doubt about your rights and duties then seek specific advice.

The law discussed in this article pertains to the English and Welsh jurisdiction only. The

law stated in this article is accurate as of 22 December 2017.

LEASE is governed by a board, appointed as individuals by the Secretary of State for the Ministry of Housing, Communities & Local Government.