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Shared ownership service charge adjustment

HB Anorak
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UC claimant, shared ownership tenant, just been given a bill to balance last year’s variable service charge.  In UC rules for renters apply.  Claimant was not on UC last year.  Cannot really find any help in the Regs or guidance as to how the payment should be attributed:

- one-off in the month the bill was received, leading to a single anomalous UC payment?
- taken into account going forward over the period until the next similar bill might be expected (i.e. this time next year - that would be my preferred option, because an overpayment and refund/credit could be dealt with the same way - always looking ahead, never back)
- or it relates to last year, claimant wasn’t on UC last year so tough

I’m surprised that the ADM is silent about this, it must happen all the time.  Any suggestions?

Timothy Seaside
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I always worry I’m missing something when an answer looks clear to me, but here goes anyway…

Service charges are “relevant payments” under Para 3 of Sch 4. They are taken into account under Para 6. Doesn’t that mean Para 7 applies, and an annual charge is just divided by 12. If there is another balancing act performed at some point (balancing the annual charge) then that will also be divided by 12 and taken into account (Para 6(3)).

That seems fairly clear. You don’t really need to worry about what period the service charge applies to. If it’s a service charge and the payment, liability and occupation conditions are met, then take it into account. And if it is a payment relating to a whole year then divide it by twelve.

I think it’s implicit in these rules that an annual service charge or adjustment should only stay on the claim for twelve months maximum. And it would mean that UC need to be careful not to allow one year’s service charge to overlap with another; especially if there is a separate adjustment floating around. E.g. service charge issued in January becomes RP1. Adjustment issued in September becomes RP2. RP1 and RP2 are paid together - they are different payments. New service charge issued the following January replaces RP1, rather than becoming RP3 - it is still different to RP2, but it is effectively the same as the original RP1. Although I can see the administrative might of the UC computer system struggling with this, I don’t think that changes the simplicity of what the rules are saying.

What am I missing?

HB Anorak
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Thanks Timothy - was hoping this one might tempt you.

What was bothering me was - Schedule 4 para 7 is concerned with calculating the monthly amount of charges that are paid other than monthly, it isn’t concerned with determining whether the charges are payable in respect of a period that includes this particular month.  The service charge adjustment is an annual charge, but for which year?  A year from when the bill is issued?  A year ending on the date when the bill is issued?  The same year in which the services were provided?  Or something else?

Am I right that I think you are saying: if there has been an annual bill within the past year, the monthly amount of that payment for the time being for UC purposes is one twelfth of the annual amount.  Every month you are a person who pays an annual service charge, and the amount of the charge is whatever the last bill was - correct?

Elliot Kent
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The problem is more that there is no bit of law which says how liability is attributed to one period of time rather than another (something like reg 54(1)). It can’t be that the enquiry stops once you have identified that the relevant payment exists.

Suppose that the service charge from 2017 was simply unpaid despite a timely demand for it (and no enforcement action had been taken). You could equally say that the liability, occupation and payment conditions are met and it’s an annual bill. So could you also insist on payment of 1/12 in it in each AP until it was discharged?

I think that you could coherently argue that the relevant payment is brought into calculation in the AP in which it is demanded - which then has the result you are looking for. But honestly reading the regs as a whole, I think the intention is to split the annual payment up across the months which it actually relates to - which leaves your client out in the cold.

 

[ Edited: 8 Oct 2020 at 03:37 pm by Elliot Kent ]
HB Anorak
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Thanks Elliiot - the other fish I was hoping to land.  I’m glad it’s not just me who finds the regs unhelpful in a case like this.

Timothy Seaside
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The more I read and think and try to apply the regulations to this, the more I contradict myself and the further I get from an answer.

As Elliott says, it’s a problem that there’s nothing to explicitly say how to match a liability up to an assessment period.

The problem with the example of the unpaid service charge from 2017 is that it has been replaced by another occurrence of the same payment. It has become an arrear. If we were talking about rent then this would be self-evident - failure to pay rent in February doesn’t increase the monthly rent liability in March. The rent liability only changes when the rent is increased. I was going to say that Para 6(3) supports the idea that there can only be one service charge, but it does and it doesn’t - depending on whether a service charge is a “particular payment” or a new service charge is a “different payment of the same description”.

Carrying on with rent, I think Para 6(3) is saying that a weekly rent payment is a particular payment and so there can only be one, even though it may be paid five times in an assessment period. The way the calculation arrives at a monthly rent is precisely by ignoring the repeat occurrences of the same payment - so it is 1 x weekly rent x 52/12, rather than 5 x weekly rent x 52/12.

Perhaps the question is whether the adjustment is a new charge, or whether it comprises part of the old charge. I would certainly be arguing that it is a new annual charge and a new liability from the date it is issued - the fact that it relates to work that was done a couple of years ago isn’t really relevant. It’s not an arrear, it’s due now.

Of course you may find that your biggest battle is getting UC to accept that they need to pay a service charge at all. By the time you’ve won them over to that idea, they may be so impressed with your knowledge that they won’t question whether it relates to the current AP or not.

Timothy Seaside
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HB Anorak - 08 October 2020 03:09 PM

Am I right that I think you are saying: if there has been an annual bill within the past year, the monthly amount of that payment for the time being for UC purposes is one twelfth of the annual amount.  Every month you are a person who pays an annual service charge, and the amount of the charge is whatever the last bill was - correct?

Exactly.

Charles
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What would have happened under HB?

HB Anorak
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Full house now!  One doesn’t like to say “would Charles or Timothy or Elliot please answer this, no disrespect to the rest of you”, but if it happens it happens.

HB would struggle with this too!  If I was making the decision I would go for prospective attribution over 12 months from the date of the bill.  In the case that prompted me to start the thread, the UC claim is recent and I suppose it could be argued that the claimant had enough income to pay their service charge at the time the services were being provided, they know there is an annual adjustment so if they didn’t put a bit by it’s their look-out.  But suppose you are on UC or HB long term and have no resources from which to pay service charge adjustments.  There are real difficulties with the way the decisions and appeals regs are drafted, they do not really contemplate a beneficial change of circumstance occurring with retrospective effect (which is why we have special rules for awards of PIP etc in arrears).  The way round that is to apply it prospectively.

I see this as being analogous to annual bonuses received from work: some people say they should be attributed to the period in which they were earned, which can lead to an overpayment, but I prefer to see annual bonuses as a subset of fluctuating earnings justifying a refreshed estimate of the average going forward.