A London council faces paying a £26.8m refund to tenants who were overcharged for water, in a case that could have implications for many other landlords.
It emerged this week that the amount Southwark Council would pay to tenants has more than tripled, since it lost a High Court case in March.
The case could affect 70 councils and housing associations, which have similar arrangements with utilities company Thames Water across London and the South East.
Southwark Council originally agreed to refund 48,000 tenants for the period between 2010 and 2013.
However, council minutes this week reveal the local authority has agreed to extend the period to between 2001 and 2013.
The decision means the authority’s bill will rise from £8.3m to £26.8m.
Council minutes reveal the borough took the decision because it “wishes to avoid any further legal challenge and draw a line under the matter”.
“The council has reconsidered its position and formed the view that it would be both prudent and reasonable to extend the period of liability to the commencement of the first Water Resale Order (April 2001), and make refunds from that date up to 28 July 2013,” the minutes state.
Southwark Council collects payment for water and sewerage services from tenants on behalf of Thames Water.
The case in March was concerned with whether the borough acted as an ‘agency’ for Thames Water or a ‘customer’ under the Water Resale Order 2006. As a customer, they should have passed on savings to tenants as they were technically reselling water services.
Under the arrangement, which operated between 2001 and 2013, the authority paid Thames Water a quarterly lump payment, which was reduced by 5% to reflect voids and 18% for the council’s commission fee.
However, these reductions were not reflected in tenants’ water bills and residents were charged the full rate.
Southwark Council should have passed this money on to tenants, the court found in March.
Gareth Mitchell, partner at Deighton Pierce Glynn – which acted for a tenant in the case – calculated that the refunds would be worth between £600 to £700 per resident for the 2001 to 2013 period.