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[1991] UKSSCSC CIS_109_1989 (26 September 1991)

R(IS) 4/92

Mr. M. J. Goodman CIS/109/1989
26.9.91

Housing costs – tenant's obligation to reimburse landlord the cost of premiums for a comprehensive household insurance policy – whether a service charge

The claimant (now deceased), a leaseholder in private rented accommodation, was obliged as a condition of his lease, to reimburse his landlord the cost of premiums for a comprehensive household insurance policy. The claimant contended that the payment should be considered as an eligible service charge. The tribunal found that the insurance premium could not be treated as a service charge in the terms of paragraphs 1(f) and 1(h) of Schedule 3 to the Income Support (General) Regulations 1987. The claimant appealed to a social security Commissioner who allowed the appeal and remitted the case to an adjudication officer to ascertain whether housing benefit could be paid in respect of the insurance premium.

Held that:

the obligation, contained in the lease, on the landlord to use the insurance monies for reinstatement or rebuilding means that these insurance charges are undoubtedly connected with the provision of adequate accommodation (paras. 14 and 15);

the insurance charges in this case come within the term service charges under paragraph 1(f) of Schedule 3 to the Income Support (General) Regulations 1987 (para. 16);

if the insurance payments are reimbursable under the Housing Benefit Regulations 1987 then no award can be made under Schedule 3 to the Income Support (General) Regulations 1987 (paras. 16 and 17).

Note. In coming to his decision the Commissioner had regard to the reasoning set out in the appendix common to R(IS) 3/91 and R(IS) 4/91.

DECISION OF THE SOCIAL SECURITY COMMISSIONER

I allow the appeal on behalf of the deceased claimant's estate against the decision of the social security appeal tribunal dated 30 January 1989 as that decision is erroneous in law and I set it aside. I give the decision which the tribunal should have given, namely that the sums payable by the deceased to the landlord of his home (currently £621 per annum) under clause 2(1)(ii) of a lease dated 4 April 1975, being reimbursement to the landlord of the premiums paid for fire and household comprehensive insurance on the said home constitute "service charges" within paragraph 1(f) of Schedule 3 to the Income Support (General) Regulations 1987 [SI 1987 No. 1967]. They are not "ineligible service charges" within the meaning of paragraph 9(2)(b) of Schedule 3 to those 1987 Regulations (referring to para. 1(g) of Schedule 1 to the Housing Benefit (General) Regulations 1987, SI 1987 No. 1971) as they are "connected with the provision of adequate accommodation". Consequently the said payments are prescribed housing costs for income support purposes, provided that they are not treated by the appropriate local authority as being "housing benefit expenditure" within the meaning of regulation 2(1) of and paragraph 5(a) of Schedule 3 to the Income Support (General) Regulations 1987.

This is an appeal to the Commissioner on behalf of the estate of a deceased claimant. The appeal was the subject of an oral hearing before me on 12 September 1991.

The claimant's widow was not present but was represented by her daughter. The adjudication officer was represented by Mr. J. M. Reid of the office of the Chief Adjudication Officer. I am indebted to the claimant's daughter and to Mr. Reid for their assistance to me at the hearing.

The appeal is against the unanimous decision of a social security appeal tribunal dated 30 January 1989 and is with the leave of the chairman of the tribunal. The decision of the tribunal was "The appeal as to insurance premium fails". That referred to a decision of the local adjudication officer issued on 15 March 1988 which detailed the amount of the deceased claimant's entitlement to income support and added, "No provision exists in the regulations to award separate amounts in respect of either water charges or home insurance policy". I am concerned only with the question of the insurance premiums.

The findings of fact of the tribunal were:

"Having considered [the deceased claimant's] circumstances and particularly when he and his wife live without anybody else to share the house or the insurance premium is not being collected by the landlord as service charge, the tribunal held that insurance premium cannot be treated as the service charge".

The tribunal's reasons for decision were as follows:

"[The deceased claimant] is responsible for the outgoings of his house according to his lease. He is also liable amongst others for insurance premiums to the landlord. This amount is not collected as service charge. Hence the tribunal held that insurance premium cannot be treated as service charge."

Both Mr. Reid and the deceased claimant's daughter submitted to me at the hearing that those findings of fact and reasons for decision were in breach of regulation 25(2) of the Social Security (Adjudication) Regulations 1986 as being inadequate. I accept those concurring submissions and, although I appreciate the difficulties of a tribunal dealing with a complicated issue of this kind, I must undoubtedly set their decision aside on that account. Both the claimant's daughter and Mr. Reid asked me not to remit the case back to another social security appeal tribunal for rehearing and I willingly accede to that request since I have all the materials available to me, both factual and legal, myself, to give a decision, which I have done in paragraph 1 above.

The factual position is, shortly, as follows. The deceased claimant had been in receipt of supplementary benefit prior to the introduction of the income support scheme on 11 April 1988. On the transition to income support, the local adjudication officer decided on 15 March 1988 that no addition could be made to the claimant's income support in respect of charges payable by the deceased claimant to the landlord of his home (a house in London) for reimbursement to the landlord of insurance charges payable by the landlord in respect of a fire and comprehensive insurance of the house. Those charges arose under clause 2(1)(ii) of a lease dated 4 April 1975, on the terms of which the deceased claimant and his widow have held as tenants, clause 2(1) (ii) of the lease provides as follows:

"2. the LESSEE for himself and his assigns hereby covenants with the lessors in manner following that is to say That the Lessee

(1) (i) [covenants for payment of rent]

(ii) will also during the said term pay to the Lessors a sum or sums equal to the amount or amounts which they shall expend in pursuance of the covenant by them hereinafter contained for insuring the said messuage and premises against loss or damage by fire and other risks covered by a Householder's Comprehensive Policy including an amount to cover Surveyor's fees in accordance with RIBA scale in force from time to time during the term hereby granted and other incidental expenses in connection with reinstatement of the said premises and further insuring in similar manner two years' rent thereof every such sum to be so paid by the Lessee on the day on which the same shall be due to the Insurance Company. [Proviso for abatement of rent if property wholly or partly damaged by fire or other insured risk]."

Clause 4 of the lease provides as follows:

"4. And the LESSORS do hereby COVENANT with the Lessee that they the Lessors -

Will at all times during the said term (unless such insurance shall be vitiated by an Act of the Lessee) insure and keep insured the said demised premises against loss or damage by fire and other risks covered by a Household Comprehensive Policy in the full building value thereof including an amount to cover Surveyor's fees in accordance with the RIBA scale in force from time to time during the term hereby granted and other incidental expenses in connection with the reinstatement of the said premises in the Sun Alliance and London Insurance Group or such other Insurance Office of repute as they shall appoint AND ALSO insure and keep insured in a similar manner two years rent thereof AND will upon request produce to the Lessee the Policy of such insurance and the receipt for the last premium paid in respect of the same and further that in case of destruction of or damage to the said premises or any part thereof by fire the Lessors will with all convenient speed (unless such insurance as aforesaid shall have been vitiated as aforesaid) spend and lay out all monies received in respect of such insurance in rebuilding or reinstating in a good and substantial manner the premises so destroyed or damaged and in or towards such rent and Surveyor's fees aforesaid."

The above quoted clause 4, obliging the Lessors to apply insurance money to reinstate the premises where they have been damaged by fire, is important in the construction of the relevant regulations in this case (see below). In any event, apart from clause 4, there would have been an obligation under the general law for such money to be spent in reinstatement (see Mumford Hotels Ltd v. Wheler [1964] Ch. 117 and the Fires Prevention (Metropolis) Act 1774).

The question therefore for my decision is whether the sums payable by the deceased claimant and subsequently by his widow to the landlord in this case amount to "service charges" within the meaning of eligible housing costs for income support purposes in paragraph 1(f) of Schedule 3 to the Income Support (General) Regulations 1987 or alternatively whether they are "payments analogous" to service charges within the meaning of paragraph 1(h) of Schedule 3. There is no definition of "service charge" in these regulations. Their predecessor, the Supplementary Benefit (Requirements) Regulations 1983 [SI 1983 No. 1339] by regulation 18(1)(e), gave as an example "service charges (for example for . . . insurance . . . of common areas)." Regulation 10(7) of the Housing Benefit (General) Regulations 1987 defines "service charges" in the following manner:

" 'Service charges' means periodical payments for services, whether or not under the same agreement as that under which the dwelling is occupied, or whether or not such a charge is specified as separate from or separately identified within other payments made by the occupier in respect of the dwelling; and

'services' means services performed or facilities (including the use of furniture) provided for, or rights made available to, the occupier of a dwelling."

Those definitions of course are not directly applicable to the Income Support (General) Regulations 1987 and must therefore be applied only with caution to them (compare paragraph 10 of the appendix to two reported decisions of a tribunal of Commissioners on the meaning in another factual context of "service charges" in R(IS) 3/91 and R(IS) 4/91). In the appendix to those two decisions, the tribunal, at paragraph 13, indicates that it is difficult to envisage any charge which is analogous to a service charge. I follow that ruling and therefore must consider solely whether in fact what I am concerned with here are "service charges".

At paragraph 15 of the appendix to their decisions, the tribunal say:

"We now turn to consider more precisely the scope of the meaning of 'service charges' in relation to housing costs. It seems to us that there is a basic distinction between, on the one hand, what might properly be called charges in respect of services rendered for housing and, on the other hand, charges which give rise to contractual duties which relate only to a particular house for the exclusive benefit of its occupier. Thus an occupier contracting with a painter for the painting of the outside of his house does not thereby acquire something which could properly be called, in our view, a service in relation to his house. Even if a group of occupiers entered into a contract with one of their number, or with an independent person acting as agent, to arrange for such decorating work, the result would be the same; there would be a contract for painting in return for payment. However, if by some means the occupiers were obliged to accept the determination of the agent or a third party as to when and how the decorating was to be arranged and were equally liable for the cost, then this would, in our view be more of the nature of a service being provided, in the shape of the arranging for the painting rather than of the painting itself. Indeed, it seems to us that, in the context of housing, the essence of the concept of a service is the provision, that is to say the determination and the arranging, of what would otherwise be left to the occupier to do for himself. However, we feel that in order to put the commitment to such an arrangement on to the level of a service, it must not be one from which an occupier can withdraw at pleasure. We conclude that the arrangement must by some means be binding upon all those with the same interest in the property e.g. all the tenants of a single landlord in a single property, or it must run with the land so as to be binding upon successors in occupancy."

I have no hesitation in holding that the charges payable by the deceased claimant and his widow in this case come within the definition of "service charges", as thus defined by the tribunal of Commissioners in the above cited passage. Both the claimant and his successors entitled to the tenancy are obliged to make the payments to the landlord. If they do not do so they are liable to be evicted under the forfeiture clause contained in paragraph 3(4) of the Lease. The landlord in this case is the provider of a service i.e. insurance which the landlord covenants to apply to the reinstatement of the property if destroyed by fire. The insurance of two years rent is connected with this (compare the abatement of rent clause). Clearly the insurance charges payable in this case are "service charges" (compare para. 18 of the appendix to R(IS) 3/91 and R(IS) 4/91).

At the hearing before me, Mr. Reid made an open submission on the above point but he nevertheless contended that, for all that, the insurance payments were not "service charges" because they were excluded by the provision of paragraph 9(2)(b) of Schedule 3 to the Income Support (General) Regulations 1987 which excludes from taking into account a case "where the costs are inclusive of ineligible service charges within the meaning of paragraph 1 to Schedule 1 of the Housing Benefit (General) Regulations 1987 (ineligible service charges) . . .".

The above referred to paragraph 1 of Schedule 1 to the Housing Benefit (General) Regulations 1987 provides that a number of service charges "shall not be eligible to be met by housing benefit". There are listed eleven different kinds of ineligible service charges, including for example the provision of meals, laundry, cleaning of rooms and windows, medical and nursing care, and ending up in paragraph 1(g) with an overall exception of "charges in respect of any services not specified in sub-paragraphs (a) to (f) which are not connected with the provision of adequate accommodation". (my emphasis).

Mr. Reid did to some extent modify his submission when I pointed out that the general law would normally compel the landlord to expend insurance monies on reinstatement. I should also make it clear that unfortunately Mr. Reid had not been supplied in advance with a copy of the lease but I understood him to say that he was prepared for me to give a decision without any adjournment or opportunity for further submission from him on the lease. 'I have therefore proceeded to do so. In my judgment the obligation in this case in the lease on the landlords to use the insurance monies for reinstatement (at least in the case of damage by fire) does mean that these insurance charges are undoubtedly "connected with the provision of adequate accommodation". They are designed to secure the continuance for the claimant and his widow literally of a roof over their heads. If paragraph 5 of an unstarred Commissioner's decision (on voluntary insurance of a home) on file CIS/17/1988 is intended to indicate to the contrary, then I respectfully dissent from it.

It follows that in all respects in my judgment the insurance charges in this case come under the head of "service charges" as eligible housing costs for income support purposes under paragraph 1 of Schedule 3 to the Income Support (General) Regulations 1987. There is however one matter which was not contained in the parties' submissions but to which I drew attention at the hearing. That is that paragraph 5(a) of Schedule 3 to the Income Support (General) Regulations 1987 provides that "no amount may be met under the provisions of this Schedule . . in respect of housing benefit expenditure". "Housing benefit expenditure" is defined by regulation 2(1) of those 1987 Regulations as "expenditure of a kind for which housing benefit may be granted".

I have caused enquiries to be made as to whether the deceased claimant or his widow had ever applied for or received housing benefit, since there is a suggestion in the appeal papers that these insurance payments could come under the head of "rent" reimbursable by means of housing benefit under paragraph 10(1)(e) of the Housing Benefit (General) Regulations 1987 which includes "payments of, or by way of, service charges payment of which is a condition on which the right to occupy the dwelling depends;". In this case because of the forfeiture clause in the lease it could be argued that the payment of these insurance charges is a condition on which the right to occupy the home depends. But I have no jurisdiction to decide positively whether an item is or is not allowable housing benefit expenditure. Mr. Reid informed me that his enquiries of the relevant local authority had been inconclusive and the claimant's daughter was not able to assist me, despite enquiries she had made. I do not think it right that there should be further delay in this case. The adjudication officer should ascertain forthwith whether housing benefit will be paid in respect of the insurance charges. If not, then the appropriate award of income support must be made. Any difficulty can be referred to me for direction or supplemental decision.

Date: 26 September 1991 (signed) Mr. M. J. Goodman
Commissioner