IN THE UPPER TRIBUNAL

ADMINISTRATIVE APPEALS CHAMBER

Before Upper Tribunal Judge Poynter

Decision: This appeal by the claimant is refused. The decision of Burnley appeal tribunal on 20 August 2008 did not involve the making of any material error of law. Therefore that decision continues in effect.

REASONS FOR DECISION

Introduction

1                 In this appeal, the claimant, ET, is a young woman. At the relevant time, she was living in supported accommodation in the area administered by the respondent, Rossendale Borough Council ('Rossendale'). That accommodation was provided for vulnerable young single people by a large registered social landlord.

2                 Before 2006, the landlord provided support staff on-site 24 hours a day. However, in 2006, Supporting People ceased to fund 24 hour support and the landlord withdrew that service. The tribunal was told that the landlords became ‘concerned about the safety of the property, furnishings, fixtures, residents and visitors so a concierge service was introduced to cover those hours where staff were not on site’. That service was provided by two workers (in effect, security guards), managed by the landlord’s ‘on-site staff’ (i.e., those working at the property during the day). It was funded by an increase in the service charge payable by ET and the other residents.

3                 When calculating ET’s entitlement to housing benefit, Rossendale has restricted her eligible rent by £36.52 on the basis that part of the concierge charge was ineligible to. Rossendale took that view because it considered that:

(a)            an allowance for management and administration costs, which formed part of the charge, was excessive.

ET’s landlords had calculated that allowance by taking the figure of £14,055 per annum, dividing it between the 14 tenants living in the unit, and then further dividing the quotient by 52 to arrive at a weekly sum. The starting figure of £14,055 is described by the landlord (on page 4) as “proportion of salary based on concierge hours”. That proportion is later said (on page 49) to be “43.7% of the total Staff Salary Costs – Concierge”;

and that

(b)            an allowance of £7.07 per week for void periods and bad debts, which also formed part of the charge, was ineligible in principle to be met by housing benefit.

The landlords had calculated that figure by adding 10% to the sum of £70.70 which would otherwise have represented the weekly cost per tenant of the concierge service (including the allowance for management and administration costs).

4                 The issue in this appeal is whether Rossendale was correct to restrict ET’s eligible rent or whether the two allowances set out above are eligible to be met by housing benefit. It has been agreed between the parties that this case should be treated as a test case governing the housing benefit entitlements of all those subject to the same charge.

5                 The tribunal, consisting of a District Chairman, decided that issue as follows:

“The appeal is allowed in part.

The decision of the Respondent in relation to Housing Benefit issued on 28/01/2008 is revised.

The ‘concierge charge’ element in the appellant’s housing benefit has been correctly restricted to £52.55 per week from 02/04/2007 but an allowance for voids and bad debts, which was held ineligible by the Respondent, should be included as part of the contractual rent pursuant to CH/3548/2006 but only at a rate of 5% instead of the 10% claimed”.

6                 The claimant appeals to the Upper Tribunal with the permission of the (now) District Tribunal Judge.

7                 I have decided that the tribunal’s decision does not involve the making of any material error of law.

The law

8                 It will be convenient to begin my explanation of that decision by setting out the applicable law.

9                 It is accepted by both parties and the Tribunal that the unit in which ET lived is ‘exempt accommodation’ within the definition of that phrase in paragraph 4(10) of Schedule 3 ('the Schedule') to the Housing Benefit and Council Tax Benefit (Consequential Provisions) Regulations 2006. Therefore, by paragraph 4(1)(b) of the Schedule, ET’s eligible rent falls to be determined in accordance with the versions of regulations 12 and 13 of the Housing Benefit Regulations 2006 ('the Housing Benefit Regulations') that are set out in paragraph 5 of the Schedule. Following the usage coined by Mr Commissioner Jacobs in CH/3548/2006, I shall refer to those regulations as ‘alternative regulation 12” and ‘alternative regulation 13’ respectively.

10             So far as is relevant, alternative regulation 12 reads as follows:

‘Rent

12.—(1) Subject to the following provision of this regulation, the payments in respect of which housing benefit is payable in the form of a rent rebate or allowance are the following periodical payments which a person is liable to make in respect of the dwelling which he occupies as his home—

(a) payments of, or by way of, rent;

(b) payments in respect of a licence or permission to occupy the dwelling;

(c)-(d) …

(e) payments of, or by way of, service charges payment of which is a condition on which the right to occupy the dwelling depends;

(f)-(j) …

(2) …

(3) Subject to any apportionment in accordance with paragraphs (4) and (5) and to regulations 13 and 13ZA (restrictions on unreasonable payments and rent increases), the amount of a person's eligible rent shall be the aggregate of such payments specified in paragraph (1) as he is liable to pay less—

(a) …

(b) where payments include service charges which are wholly or partly ineligible, an amount in respect of the ineligible charges determined in accordance with Schedule 1; and

(c) …

(4)-(6) …

(7) In this regulation and Schedule 1—

"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.’

11             So far as is relevant, alternative regulation 13 reads as follows:

‘Restrictions on unreasonable payments

13.—(1)-(2) …

(3) The relevant authority shall consider—

(a) …

(b) whether by reference to a determination or re-determination made by a rent officer in exercise of a function conferred on him by an order under section 122 of the Housing Act 1996 or otherwise, whether the rent payable for his dwelling is unreasonably high by comparison with the rent payable in respect of suitable alternative accommodation elsewhere,

and, where it appears to the authority that the dwelling is larger than is reasonably required or that the rent is unreasonably high, the authority shall, subject to paragraphs (4) to (7), treat the claimant's eligible rent, as reduced by such amount as it considers appropriate having regard in particular to the cost of suitable alternative accommodation elsewhere and the claimant's maximum housing benefit shall be calculated by reference to the eligible rent as so reduced.

(4) If any person to whom paragraph (10) applies—

(a) …

(b) is incapable of work for the purposes of one or more of the provisions of the Social Security Act, or Part 2 of the Act; or

(c)-(d) …

no deduction shall be made under paragraph (3) unless suitable cheaper alternative accommodation is available and the authority considers that, taking into account the relevant factors, it is reasonable to expect the claimant to move from his present accommodation.

(5)-(7) …

(9) For the purposes of this regulation—

(a) in deciding what is suitable alternative accommodation, the relevant authority shall take account of the nature of the alternative accommodation and the facilities provided having regard to the age and state of health of all the persons to whom paragraph (10) applies and, in particular, where a claimant's present dwelling is occupied with security of tenure, accommodation shall not be treated as suitable alternative accommodation unless that accommodation will be occupied on terms which will afford security of tenure reasonably equivalent to that presently enjoyed by the claimant; and

(b) the relevant factors in paragraph (4) are the effects of a move to alternative accommodation on—

(i) the claimant's prospects of retaining his employment; and

(ii) the education of any child or young person referred to in paragraph (4)(d) if such a move were to result in a change of school.

(10) This paragraph applies to the following persons—

(a) the claimant;

(b)-(d) …

(11) …’

12             Alternative regulation 12(3) refers to “regulation 13ZA”. That is a reference to that regulation as inserted in the Housing Benefit Regulations by paragraph 5(3) of the Schedule. It relates to unreasonable rent increases and is not relevant to this appeal.

13             Alternative regulation 12(3) also refers to “Schedule 1”. That is, of course, a reference to Schedule 1 to the Housing Benefit Regulations, which deals with ineligible service charges. There is no alternative form of Schedule 1. Although the rules on rent and eligible rent differ as between ordinary accommodation and exempt accommodation, the rules on ineligible service charges are exactly the same.

14             Part 1 of Schedule 1 is relevant to this appeal. So far as relevant, that Part is as follows:

‘PART 1

Service charges other than for fuel

Ineligible service charges

1. The following service charges shall not be eligible to be met by housing benefit—

(a) charges in respect of day-to-day living expenses including, in particular, all provision of—

(i) subject to paragraph 2 meals (including the preparation of meals or provision of unprepared food);

(ii) laundry (other than the provision of premises or equipment to enable a person to do his own laundry);

(iii) leisure items such as either sports facilities (except a children's play area), or television rental and licence fees (except radio relay charges, charges made in respect of the conveyance and the installation and maintenance of equipment for such conveyance of a television broadcasting service which is not a domestic satellite service, or charges made in respect of the conveyance and the installation and maintenance of equipment for such conveyance of a television programme service where in respect of the claimant's dwelling the installation of such equipment is the only practicable means of conveying satisfactorily a television broadcasting service which is not a domestic satellite service, as these services are defined in the Broadcasting Act 1990[197]);

(iv) cleaning of rooms and windows except cleaning of—

(aa) communal areas; or

(bb) the exterior of any windows where neither the claimant nor any member of his household is able to clean them himself,

where a payment is not made in respect of such cleaning by a local authority (including, in relation to England, a county council) or the National Assembly for Wales to the claimant or his partner, or to another person on their behalf; and

(v) transport;

(b) charges in respect of—

(i) the acquisition of furniture or household equipment; and

(ii) the use of such furniture or equipment where that furniture or household equipment will become the property of the claimant by virtue of an agreement with the landlord;

(c) charges in respect of the provision of an emergency alarm system;

(d) charges in respect of medical expenses (including the cost of treatment or counselling related to mental disorder, mental handicap, physical disablement or past or present alcohol or drug dependence);

(e) charges in respect of the provision of nursing care or personal care (including assistance at meal-times or with personal appearance or hygiene);

(f) charges in respect of general counselling or of any other support services, whoever provides those services;

(g) charges in respect of any services not specified in sub-paragraphs (a) to (f) which are not connected with the provision of adequate accommodation.

Amount ineligible for meals

2. …

Amount of ineligible charges

3.—(1) Subject to paragraph 2 where an ineligible service charge is not separated from or separately identified within other payments made by the occupier in respect of the dwelling, the appropriate authority shall apportion such charge as is fairly attributable to the provision of that service, having regard to the cost of comparable services and such portion of those payments shall be ineligible to be met by housing benefit.

(2)-(3) …

(4) In any other case, the whole amount of the ineligible service charge shall be ineligible to be met by housing benefit.

Excessive service costs

4. Subject to paragraph 2, where the relevant authority considers that the amount of a service charge to which regulation 12(1)(e) (rent) applies is excessive in relation to the service provided for the claimant or his family, having regard to the cost of comparable services, it shall make a deduction from that charge of the excess and the amount so deducted shall be ineligible to be met by housing benefit.’

The tribunal’s reasons: management and administration costs’

15             The Tribunal dealt with the concierge charge as follows:

‘From October 2006, the Association employed security staff at the premises which housed fourteen tenants and a charge (described as a concierge charge) of £77.77 per week was included for this in the service cost breakdown, which increased in April 2007 to £78.32 per resident. A detailed breakdown of the claimed concierge service costs is set out at pages 22 (from October 2006) and 23 (from April 2007) of the appeal bundle.

Prior to October 2006 a service manager had been resident at the premises during office hours and £2.35 per week per resident was charged for the administration of this service.

There was therefore a considerable increase in the amount claimed from the local authority from October 2006.

It is accepted by the local authority in principle that it is reasonable for a concierge charge to be included as eligible for Housing Benefit because it is property related. However, it is the amount of that charge which is in issue.

… [T]he local authority only allowed the direct salary costs, namely the actual wages paid to the security staff, being £51.40 per week [i.e., per tenant] from October 2006 and £52.55 per week from April 2007.

They disallowed all of the remainder (detail page 42) as being excessive and unreasonable.

It was claimed that the management and administration costs set out at pages 22 and 23 were based on 43.7% of the salaries of the two managers responsible for looking after the Security Staff. Further details of this element are given at page 33 of the appeal bundle.

However, despite repeated requests from the local authority to explain why 43.7% of the salary costs were required … no satisfactory explanation was provided as to why from October 2006 nearly half of the time of the manager and administrator was taken up in looking after the two security staff with only just over half being taken up in looking after the fourteen tenants in the Property. Nor, despite my asking, was the representative of the appellant’s [sic] at the hearing able to enlighten me as to this.

It is simply stated at page 64 that the management and admin cost of £15,457 represents 43% of salary costs and equates to the amount of time spent on eligible housing and accommodation services.

It seemed to me, however, as it had appeared to the local authority, that this cost could not be justified on any rational basis. It seems to me to be a totally disproportionate and unjustifiable percentage and I do not accept that it can be justified.

I find that it is excessive.

Attempts were made to find comparisons, as the appellant’s submission … was that unless it was possible to find comparators it was not possible to say that the charge was excessive. I do not accept that argument. Although there is a reference to a comparison in the Schedule the only requirement is ‘to have regard to the costs of any comparable services’ which does not in my view impose an obligation either to find a comparator which (as demonstrated in this appeal) might be difficult or even impossible, nor does it mean that the amount charged by a comparator will necessarily determine whether the charge made by the appellants is excessive.

I consider that in order to determine whether a charge is excessive it is necessary to consider all the circumstances including, but not limited to, the charge levied by a comparator if a genuine comparator can be found.

Since there is no other evidence before me as to what would be a reasonable amount to allow for the management and administration costs, any estimate I might make as to what ought to be reasonable would be a complete guess. I am not prepared to make such a guess and accordingly I disallow that amount in full as had the local authority and the appeal in relation to that point is dismissed.’

The grounds of appeal: management and administration costs

16             ET’s representatives criticise that decision on three grounds:

(a)            It is said that the concierge charge must be viewed as a whole because the landlord is unable to provide the service if any element of the charge is not recovered. It is said that the whole charge is part of ET’s contractual rent and that, therefore, individual elements of the charge should not be considered.

(b)            It is said that the landlord has now investigated outsourcing the concierge service to a specialist contractor and that to do so would have led to higher charges.

(c)            It is said that the tribunal’s approach to the issue of comparables was wrong in law and that, as was submitted to the tribunal at the hearing, the fact that no comparables had been offered in evidence mean that the Tribunal could not lawfully conclude that the concierge charge was excessive.

The relevance of contractual entitlement and the treatment of itemised charges

17             The first of those criticisms simply cannot be sustained. Unless the service charge formed part of ET’s contractual rent she would not be legally liable to pay it and, as housing benefit can only meet charges for which the claimant is legally liable, the charge would be ineligible on that basis without having to consider the exclusions and restrictions in Schedule 1. In other words, forming part of the claimant’s rent is a necessary condition for a service charge to be met by housing benefit.

18             But it is not a sufficient condition. Part 1 of Schedule 1 lists at least 13 types of charge that are ineligible to be met by housing benefit even though the claimant is contractually liable to pay them.

19             Neither is it the case that local authorities (or on appeal, the tribunal) must accept the itemisation of a service charge as the claimant (or her landlord) choose to present it and cannot look more closely into the breakdown of any particular item. Paragraph 3 of Part 1 of Schedule 1 specifically contemplates that an ineligible service charge might not be ‘separately identified within’ another charge and confers an express power to apportion the larger charge so that housing benefit is only paid in respect of those parts that are eligible.

20             The decision of the Commissioner in R(IS) 2/07 is relevant in this context. That decision stressed the need for sufficiently detailed evidence of the amount of time devoted by staff to providing the service under consideration. That need exists because, until one knows precisely what the staff providing the service are doing and how long they spend doing it, it is often impossible to know whether the charge for that service is eligible in principle to be met by housing benefit and, if so, whether that charge is excessive.

21             Finally, the premise on which this ground of appeal is based is incompatible with the tribunal’s findings and reasoning (which, in the absence of a material error of law, are binding on me). Analysis of the statement of reasons shows that the tribunal did not accept that the landlord would be unable to provide the concierge service if the claimed charge was not met in full. The disputed part of the charge was based on the landlords’ assertion that an administrator and manager each had to spend 43.7% of their time administering and supervising the work of two security guards. The tribunal said that was excessive. It did so, not because (for example) it considered the manager and/or administrator were overpaid, but because it considered that the administrator and manager did not need to spend as much of their time administering and managing the concierge service as it was claimed they were spending. In other words, the tribunal was satisfied that the service required less administration and management than was reflected in the disputed charge. It is a necessary inference that the tribunal believed the service could be delivered even if the disputed charge was not met in full.

The charges levied by specialist contractors for outsourcing the concierge service

22             The second ground can also be dismissed briefly. An appeal to the Upper Tribunal only lies on the ground that the tribunal’s decision ‘involved the making of an error on a point of law’. By the second ground of appeal, ET’s representatives are, in effect, criticising the tribunal’s decision about the facts on the basis that it did not take into account evidence that it did not know existed. That obviously will not do. Absent a failure to exercise its inquisitorial jurisdiction (and there has been no such failure in this case), a tribunal does not err in law by failing to have regard to evidence that the parties have not put before it. If ET’s representatives wished to argue that Rossendale’s decision was wrong because the cost of outsourcing the service showed the disputed charge to be reasonable, then it was for them to obtain that evidence before the tribunal hearing and to put it before the tribunal at that hearing. It is too late to produce it after the tribunal has made its decision.

23             In any event, the additional evidence appears to me to be unhelpful because it is insufficiently detailed. It is unclear how the specialist providers have calculated their charges for the prospective ‘outsourced’ service. And in the absence of more detail, the fact that the outsourced charges would have been higher does not show that the disputed charge in this case was not excessive: it is possible that both charges were excessive, but the outsourced charge more so.

The relevance of ‘comparables’

24             This ground requires more detailed consideration, not least because the tribunal’s statement of reasons inadvertently misquotes the law. The regulations did not require the Tribunal

‘to have regard to the costs of any comparable services’

as the Tribunal quoted (emphasis added). Rather, paragraph 3(1) of Schedule 1 required the tribunal to

‘apportion such charge as is fairly attributable to the provision of that service [i.e., the ineligible service], having regard to the cost of comparable services’

and paragraph 4 required it to consider

‘the amount of a service charge to which regulation 12(1)(e) (rent) applies is excessive in relation to the service provided for the claimant or his family, having regard to the cost of comparable services,’.

The tribunal’s addition of the word ‘any’, which does not appear in paragraphs 3 or 4, begs the very issue that was in dispute, namely whether either paragraph can apply if there are no comparables.

25             But despite that mistake in setting out the law, I am satisfied from the statement taken as a whole that the tribunal applied the correct legal test to the issues before it and that it reached the correct decision.

26             The tribunal based its decision on paragraph 4. Whether or not that paragraph applies in cases where there are no comparables depends upon the construction of the paragraph taken as a whole. In particular, I consider it relevant that the primary obligation in paragraph 4 is not to conduct a comparison between the disputed charge and comparable charges but to consider the ‘service provided for the claimant or his family’ and decide whether the charge is ‘excessive in relation to’ that service. Comparable charges are only relevant to the way in which that decision is made: the decision maker must ‘have regard’ to them while making it.

27             It is also relevant that the obligation is only to ‘have regard’ to comparable charges. It is an obligation to consider such charges but, once the decision maker has considered them, the paragraph does not seek to prescribe the manner in which such charges should affect the outcome. It is therefore possible for the decision maker to have regard to comparable charges but then to form the view that, in the particular circumstances of the case, such charges are irrelevant to the decision s/he has to make.

28             That possibility is not merely theoretical. It is easy to envisage circumstances in which one might conclude that a charge was excessive in relation to the service provided merely on the basis of factors relating to the service itself and without the need to base one’s decision on a comparison with the cost of comparable services. For an example, it is clear that the concierge service in this case can be satisfactorily provided using two workers. Suppose, however, that the landlords decided to employ four workers to provide it and to charge the residents for the cost of four salaries rather than two. A decision maker who was apprised of the full facts could properly conclude that the charge for the service was excessive without considering the cost of comparable services: it would be enough that twice as many workers were being charged for as were necessary to provide this particular service.

29             As:

(a)            it is possible in some cases to make the comparison required by paragraph 4 without having regard to comparable charges;

(b)            paragraph 4 permits the decision maker to ignore comparable charges when they are not relevant to what has to be decided; and as

(c)            paragraph 4 provides the only mechanism in the Regulations whereby excessive service charges may be restricted

it is inconceivable that Parliament can have intended the existence of comparable charges to be a pre-condition for the application of that paragraph.

30             The point can best be demonstrated by continuing the previous example, if the present ground of appeal is correct, the excess service charge resulting from the employment of four workers to do the job of two can only lawfully be restricted if Rossendale can identify examples of comparable services elsewhere even though such service may not exist and would inevitably be irrelevant.

31             To avoid that sort of absurdity, I conclude that the proper construction of paragraph 4 is that placed on it by the tribunal. If comparables exist, then the decision maker is bound to have regard to them. However, that duty is only one aspect of the general public law duty to have regard to all relevant factors when making an administrative decision. If no comparables are available, that circumstance does not prevent the exercise of the power in paragraph 7 if there is other material on which it can properly be concluded that the amount of a service charge is excessive in relation to the service provided for the claimant or his family.

32             It follows that I agree with the District Tribunal Judge when he states that

‘in order to determine whether a charge is excessive it is necessary to consider all the circumstances including, but not limited to, the charge levied by a comparator if a genuine comparator can be found.’

33             One further legal issue arises. Once it has been established that a service charge is excessive, paragraph 4 requires the decision maker to make a deduction from that charge of the excess. The tribunal did not disallow the excess. For the reasons it gave it disallowed the entire disputed charge. Was it correct to do so? Could it not be argued that the tribunal could only properly have concluded that the disputed charge was excessive by determining a proper charge and noting whether the actual charge exceeded it. If so, how can the tribunal be satisfied that the charge was excessive without also knowing the amount of the excess?

34             In my judgment, the answer to these questions will depend upon the evidence before the Tribunal and ultimately on the burden of proof.

35             In an appeal where the claimant engages with the Tribunal and seeks to justify the disputed charge with detailed evidence, it will often be impossible to conclude that a charge is excessive without also knowing by how much. (Although, even then, there may well be cases where a charge is manifestly so far on one side of the line between proper and excessive that it is possible to conclude that it is excessive without being able to identify precisely where the line lies.)

36             But this is not such a case. As the tribunal noted, those representing ET were asked time and time again by Rossendale and the tribunal to provide the necessary details to justify the management and administration charge but failed to do so. The tribunal had to reach a decision on the evidence available to it and that evidence sought to justify the disputed charge on the basis that two members of ‘on-site’ staff, who one would normally expect to be working to provide support for the residents there (or to provide management and administrative support for others performing that function) were instead spending 43.7% of their time (30.6 person hours a week between them if one assumes a standard 35 hour week) to support and manage two security guards providing a routine concierge service. In the absence of further evidence, that is inherently implausible: so much so, that it gives the unfortunate impression that the landlords were attempting to inflate the claim by loading it with the cost of administrative and managerial time that is actually spent providing other, ineligible, services. In my judgment, the tribunal was entitled to conclude that the management and administration charge was manifestly excessive even though it did not have sufficient evidence to put a precise figure on what a proper charge would be.

37             This is an appeal in which ET was seeking to supersede an existing award of housing benefit so as to increase the level of eligible service charge included in that award. In those circumstances the burden her (or those representing her) to show that the increased service charges were eligible. It was not for Rossendale to show the contrary. It would have been an error of law for the tribunal to have made a finding as to what was a proper level of charge when it had no evidence upon which to base such a finding. Therefore, as ET had not provided the with material on which it could determine what a proper charge would have been the tribunal was, in my judgement, correct to treat the entire charge as excessive.

38             For those reasons, and despite misquoting the applicable law, the Tribunal has applied the correct legal test on the issue of the concierge charge. I agree with its decision on that issue and, as it has not made any error of law, I would have had no power to interfere with that decision.

39             I wish to make one final comment because, as I understand it, the supported housing scheme continues to operate and it seems to me that those representing ET still do not understand why she was unsuccessful on the main issue of fact. To summarise:

(a)            Rossendale, the tribunal and the Upper Tribunal all accept that the provision of the concierge service requires some administration and management;

(b)            It is also accepted that, as the charge for the provision of the concierge service is eligible to be met by housing benefit, a proper charge for the administration and management of that service will also be eligible;

(c)            It is accepted that a proper charge for the administration and management of the service should be based on the cost of the time of the administrator and manager. In practice the most convenient way of calculating that cost will be to ascertain the total cost of employing those people and then apportioning that cost according to the number of hours they spend administering or managing the service.

(d)            It has also been understood, that the landlords have costed the service at 43.7% of the costs of the employees concerned. It serves no purpose for those representing ET simply to repeat that fact, without more, every time further information is requested.

(e)            What is not accepted, however, is that those employees actually spend 43.7% of their working time administering and managing the concierge service. It is not accepted because it is not understood what those employees are actually doing in relation to the service that could possibly take up so much time, nor why two security guards performing a routine task should require such apparently labour-intensive management and administration.

(f)              Therefore, if there is to be progress on this issue as regards future claimants, the landlords will need to provide at least the following:

i)                 a full job description for the administrator and the manager;

ii)               details of how many hours a week each works so that 43.7% can be converted into hours and minutes allegedly spent working on the concierge service;

iii)              details of precisely what the administrator and manager do during the time they are said to spend working on the concierge service, and how they spend the rest of their time (so that Rossendale or a future tribunal can make their own apportionment if necessary); and

iv)              details of how (in the light of all the preceding information) the landlords have arrived at the 43.7% figure.

The tribunal’s reasons: void periods and bad debts

40             It will be remembered that the concierge charge also included a 10% provision for void periods and bad debts and that Rossendale disallowed that part of the charge in full(see paragraph 3(b) above).

41             On appeal, the tribunal found—in reliance on the decision in CH/3548/2006—that the provision was eligible in principle but that a provision of 10% was excessive. The presenting officer had given evidence that in her experience the maximum amount claimed had been ‘in the region of 5% rather than 10%’ and the tribunal agreed that ‘in view of the types of tenants involved., and the fact that the vast majority of them will be on reliant upon housing benefit’, 5% was a more realistic figure.

The grounds of appeal: void periods and bad debts

42             The passage in the grounds of appeal dealing with this issue reads as follows:

‘• The tribunal reduced the voids and bad debt allowance to 5% from 10% based on evidence provided by [the presenting officer].

• [The presenting officer] provided no formal evidence only a verbal statement based on her opinion.

• The tribunal decision has erred in law as it is based on no actual evidence only hearsay.

• 10% is a standard amount used for voids and bad debts as well as Supporting People contracting when estimating occupancy.

• The correct decision would be to meet voids and bad debts at 10% rather than the 5% proffered by the Council Official with no supporting evidence’.

43             Those grounds of appeal are so astonishingly misconceived, that it is difficult to know where to start with them. However, in no particular order, the following points are relevant.

(a)            What the presenting officer said to the Tribunal was evidence. Moreover, it was based not on her opinion but—as the tribunal recorded—on her experience.

(b)            The presenting officer’s evidence was probably not hearsay. She was giving evidence about allowances for voids and bad debts that had been claimed in other claims that she had personally seen.

(c)            In any event, the tribunal is not a court. It does not follow the formal rules of evidence. So, for example, relevant evidence is never—or, at any rate, hardly ever—excluded as inadmissible. When considering evidence, the only questions the tribunal had to consider were whether it was relevant and, if so, what weight to attach to it. If the presenting officer’s evidence had been opinion or hearsay, the tribunal would still have been entitled to take it into account. The distinction that the grounds of appeal seek to draw between ‘hearsay’ and ‘actual evidence’ is therefore not relevant in this context.

(d)            For those advising ET to accuse Rossendale of having provided no relevant evidence is breathtaking. I repeat that the burden was on ET to prove that the provision for voids and bad debts was eligible to be met by housing benefit and not for Rossendale to prove the contrary. That burden could have been met by providing details of the actual void periods and bad debts experienced by the particular scheme or by other, similar, schemes. Instead those advising her provided no evidence at all that a 10% provision was appropriate on the facts of this particular case and instead relied upon that percentage being the going rate or “a standard amount”.

(e)            In those circumstances, had the presenting officer not accepted that a 5% allowance was normal, the tribunal would almost certainly have been obliged to decide that although a provision for voids and bad debts was eligible in principle, the percentage to be allowed in this case was nil. There was no direct evidence of the actual void rate or bad debt level experienced by ET’s landlord and for the tribunal to have come up with its own figure would have involved guessing, which is what it correctly refused to do in relation to the management and administration charge.

(f)              I accept that the presenting officer’s evidence would have been stronger, had it been accompanied by examples of other cases in which figures less than 10% had been claimed. However, it was for the tribunal to weigh the evidence and it had to do so in the absence of any relevant opposing evidence from ET. The tribunal considered that sufficient weight attached to the presenting officer’s evidence to support its conclusion that the 10% provision was excessive. Both the weighing of the evidence and that conclusion are matters of fact, not law. Appeals to the Upper Tribunal are on a question of law only. The grounds of appeal do not disclose any error of law on this point. They do no more than express disagreement with the Tribunal’s decision on the facts. In those circumstances, it is not open to the Upper Tribunal to interfere with the tribunal’s decision.

44             Again, I hope it may help the resolution of other cases, if I say that those representing ET seem to be placing far more weight on Mr Jacobs’ decision in CH/3548/2006 than it can bear. Mr Jacobs was dealing with an allowance for voids only (i.e., as opposed to the allowance for voids and bad debts that is in issue here). He did not lay down a general rule that an allowance for voids is always eligible to be met by housing benefit, far less a standard allowance of 10%. On the contrary, he was at great pains to explain that what he had decided was that provision for voids was a factor (among others) that could properly be taken into account as an element in fixing (in that case) the rent and hence, in principle, could be eligible to be met as rent by housing benefit.

45             I accept in principle (and subject to what I say below) that the same applies to bad debts. However, CH/3548/2006 leaves open the question of what rate of provision for voids (or bad debts) is appropriate. That rate will vary from case to case and it cannot be assumed that a standard figure of 10% (or any other standard figure will be applied).

46             That is because the circumstances of individual landlords and properties differ. I acknowledge that a provision of 10% is often made in the private rented sector. When applied to voids, that percentage implies that the property will be untenanted for 5.2 weeks a year on average. That may be a reasonable estimate for general accommodation in the private rented sector. But it is not what one would expect in a scheme of supported housing such as the one in which ET lives. In my experience, places in such schemes are usually heavily in demand and there is often a waiting list. If that is the case, then one would not expect any individual room or flat to be vacant for more than a very short period: say, a week at most. It may therefore be that the 5% allowed by the tribunal was over-generous.

47             As regards bad debts, the tribunal rightly drew attention to the relevance of the fact that most residents in supported accommodation will be reliant upon housing benefit. That is a circumstance which provides the landlords with a measure of protection against bad debts that is not available to the landlords of private rented accommodation generally and may therefore mean that appropriate provision for bad debts is lower than what would be appropriate for the private rented sector as a whole.

48             It is also a circumstance that calls for caution on the part of local authorities and tribunals. In a case where all the tenants are on housing benefit, and benefit is paid directly to the landlord, bad debts will only arise if:

(a)            the rent and/or service charge has been restricted for housing benefit purposes; or

(b)            the service charge includes items that are ineligible to be met by housing benefit.

Care must be taken to ensure that landlords do not receive housing benefit for ineligible or excessive rents and charges through the back door by classing them as bad debts and then adding a provision for those bad debts to the rents of other tenants, in the hope that it will be held to be eligible.

49             What this comes down to is this. Where a provision for voids or bad debts has been included in the rent, issues are unlikely to arise. The provision will not be separately identified and will be allowed if the rent, taken as a whole is not excessive. However, there will be cases in which a provision for voids and bad debts properly forms part of a charge for services (and I do not understand CH/3548/2006 to hold the contrary). In such cases—at least where the point is put in issue—it will be for the claimant to show on a balance of probabilities that the rate at which provision has been made is not excessive having regard to the likely levels of void periods and bad debt. In the case of an existing scheme, the evidence required will usually be the levels of void periods and bad debt experienced in the past. In a new scheme, evidence will have to be provided by reference to other, similar, schemes. It follows that claimants will usually require the co-operation of their landlords to provide the necessary evidence.

50             Where no evidence, or insufficient evidence, is produced, it will be open to local authorities and tribunals to disallow the provision on the ground that it has not been shown to be eligible. Where sufficient evidence is produced, the rate at which the provision is eligible to be met by housing benefit will be a matter of judgment for the decision maker. A provision may reflect past experience of void periods or bad debts but nevertheless be excessive. That would be the case, for example, where landlords experienced a high void rate because, overall, they were charging a high rent and/or service charges for sub-standard property and/or services.

Conclusion

51             For the sake of completeness, I should mention that both parties have sought to adduce evidence before the Upper Tribunal that was not made available to the tribunal. With one exception (paragraph 22 above), I have not mentioned that evidence in this decision because it is irrelevant.

52             Under paragraph 6(9)(b) of Schedule 7 to the Child Support, Pensions and Social Security Act 2000, the Tribunal is not permitted to take into account any circumstances not obtaining at the time when the decision appealed against was made. It therefore could not have taken into account much of the additional evidence, produced in this case even if it have been made available at the proper time.

53             More importantly, the Upper Tribunal cannot reconsider the facts found by the tribunal, or the tribunal’s judgment about what is excessive, unless the tribunal’s decision contains a material error of law. In this case, there has been no such error.

(Signed on the original)

Richard Poynter Judge of the Upper Tribunal 15 June 2010