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Upper Tribunal decision concerning administrative charges and site owner’s entitlement to recoup costs of; electricity, LPG and sewage services

By Antony Tregenna and Manjit Rai

Introduction

The case P R Hardman and Others v Greenwood and Another (LRX/43/2015) considered the issue of whether the terms implied into pitch agreements by the Mobile Homes Act 1983 (as amended) or the express terms oblige mobile home owners to contribute towards administration and maintenance costs for electricity, gas and sewage services

Facts

Shortferry Caravan Park is a mixed use site. There are some adjoining facilities owned by the appellants (site owners) to which the services are supplied and paid for by the appellants. Services include Liquid Petroleum Gas (LPG), electricity and sewage services are supplied .The appellants recovered their costs from the respondents (home owners) for providing the services and charged a higher unit rate to the charges imposed by their suppliers. These charges had been paid by the respondents for a number of years, but they were unaware about they were paying for the additional charges.

The First-tier Tribunal decision

The site owner’s obligation to pay for electricity, LPG and sewage services was limited to the following:

  1. Standing charge and price of electricity delivered to their pitches at the rate paid by the site owner to their supplier
  2. A proportionate contribution to the price of electricity supplied to the swimming pool, sewage system, public toilets, laundry rooms, shower block and street lights;
  3. The cost of LPG delivered to their pitches at the price paid by the site owners to their LPG supplier.

In each case VAT was to be added to those sums to the appropriate statutory rates.

The appellants were given permission to appeal to the Upper Tier Tribunal on two issues.

  1. These were whether appellants could claim administration costs, direct costs of supplying services and overheads should be payable by paragraph 3 of express terms of the written statement (please see below ‘Issues for Upper Tier Tribunal’)
  2. Would ‘historic practice’ or ‘commercial necessity’ have a bearing on the decision?

    This was based upon the fact that the respondents had been paying the charges for a number of years.

Issues for the Upper Tier Tribunal

The Tribunal considered whether the express terms of the written statement imposed a liability to pay administration charges. They had regard to the following paragraphs

  1. To pay to the owner an annual pitch fee
  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 case of Brittaniacrest featured the same express terms and was referred to by the UTT They decided that the express term did not impose an obligation to pay for the administrative costs incurred by the appellants.

Paragraph 1 requires an occupier to “pay to the owner” whereas the second term does not identify the person to be paid. The expression “charges in respect of” in relation to 2 concerns charges levied by suppliers of services. They did not relate to charges in connection with services by the site owner

The Tribunal concluded that the cost of administering the utilities should be included in the pitch fee. The definition of pitch fee in paragraph 29 of Implied Terms is the amount of money which the occupier is required to pay to the owner to station a mobile home on a pitch. It includes use of common areas and maintenance.

The appellant argued that paragraph 2 relating to “other services” included sewage services. As the service was not connected to a mains system, the Tribunal stated that the cost of running the system should be borne by the residents. The third party costs of running the system (including emptying and servicing the system) could be recoverable.

Whilst LPG is not regulated, the reference to payment of gas, water and other services in 2 is limited to the charge that the site owner pays to an individual supplier.

The Tribunal decided that the First Tier Tribunal was wrong to determine that paragraph 2 provided an obligation for the respondents to contribute towards the costs of electricity in communal areas. This included the running for the laundry and swimming pool services. Such costs should be covered by the pitch fee. This differed from the electricity which is required to run the sewerage system. This was a running cost which could be recoverable.

Although the respondents had been paying the administration charges for a number of years, the decision was not affected by what the First Tier Tribunal regarded as ‘historic practice’. The respondents had not been aware that the charges that they had been paying included the appellants’ own expenses and administration charges.

Decision

The liability to pay for electricity, LPG and sewerage services is limited to

  1. The standing charge and unit price of electricity delivered to the pitches at the rate paid by the appellants to their supplier
  2. unit price of electricity required to operate the sewerage system at the rate paid by appellants to their supplier
  3. cost of LPG delivered to pitches at the unit price paid by appellant’s supplier
  4. charges of contractors instructed by appellants to empty and service sewerage system and fee paid to Environment Agency

What are the Implications of the Decision?

The Upper Tribunal’s decision will have an impact upon the claims of administration costs by site owners in administering and maintaining services such as utilities. The Tribunal will have to determine whether there is an express provision within the terms of the written statement.

This decision will also have implications for residents who are charged LPG which is unregulated.

Site owners who charge more than the unit rate may be unable to recover the excess charges, if there is no provision within the express terms.

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