Water UK

 • Background
 • Issue 1: What does "occupier" mean in law?
 • Issue 2: Lack of statutory powers
 • Conclusion

Background

Recent data submitted to Ofwat and Equifax highlights the scale and extent of the problem:

 • Household revenue outstanding for more than 3 months (i.e. excluding that recently billed) increased by 11% between 2006-07 and 2007-08, from £968 million to £1071 million. That is more than the 7% average increase in household bills over the same period;

 • Household revenue outstanding for more than 12 months, which is likely to be more difficult to collect, increased by £75 million between 2006-07 and 2007-08, from £599 million to £674 million;

 • The water industry wrote off £104 million worth of household debt in 2007-08 – equivalent to 1.6% of revenue billed that year

 • The cost of bad debt to the industry represents around £11 per year for every household billed for water. The cost arises from debt collection activities, writing off bad debts and financing costs associated with unrecovered revenue and is recovered from those who do pay.

 • 34% of debtors live in rented accommodation and are accountable for 44% of total water debt, according to the Equifax analysis. Affluent singles and couples in exclusive urban neighbourhoods also feature disproportionately and account for 4% of total debt.

Water debt and affordability - briefing

Issue 1: What does "occupier" mean in law?

The Water Industry Act 1999 gives water companies the power to levy water and sewerage services charges on the “occupiers” of properties supplied with water or drained directly or indirectly to a public sewer. However, the Act does not define the meaning of the word “occupier”.

Without a clear definition of occupier, water and sewerage undertakers are having difficulties imposing charges in the following situations:

 • Multiple occupiers: dwellings inhabited by persons who do not constitute a single household, or have a license to occupy only part of the building.

 • Asylum seekers, migrant workers, refugees: dwellings inhabited by persons who have an uncertain or temporary residential status within the United Kingdom.

 • Minors in the community: dwellings inhabited by persons who have not reached the age of majority.

 • Persons receiving mental health care in the community: dwellings inhabited by persons “returning” to and in the community.

 • Travellers, squatters: dwellings where persons reside who have no licence to be in occupation or whose licence to occupy is disputed by the owner.

 • Void properties: dwellings where resident persons (who are not the owner) fail to provide evidence of a licence to reside on the request of the water company.

 • Caretakers, public houses, mixed use properties: dwellings where a resident resides mainly for purposes of employment.

In many of these situations owners argue that they are not responsible for charges and that the water companies should bill the occupiers. However, in many situations the tenant’s occupation is far too transient and temporary to make it possible for a water company to levy charges to each of the multiple occupants.

Many of these owners are letting their properties as a commercial business and hold deposits which protect them against losses including the risk of bad debt.

The industry is not seeking to make registered social landlords responsible for charges other than for dwellings where such organisations provide accommodation for persons who do not constitute a single household, temporary residential accommodation and accommodation for minors and persons receiving mental health care in the community.

Issue 2: Lack of statutory powers

The water industry does not have any statutory powers to gather information to assist in billing and collecting charges.

Possible solutions

The water industry has sought a legal opinion and has been advised that a water company’s charges scheme cannot, by its definition of “occupier”, render liable for charge anyone who is not a chargeable person within sections 142 and 144 of the Act.

The enlargement of the body of individuals liable to pay water services charges can only be achieved by primary legislation, in effect the amendment or replacement of the provisions in Chapter I of Part V of the Water Industry Act 1991.

As to the form and content of such legislative changes, it could be possible to draw assistance from rating and Council Tax legislation.

The notion of “occupier” for the purposes of water charges is closely akin to that in the field of rating. However, the water industry currently has to make do with effectively no more than the single word “occupier”, whereas rating legislation has become significantly more subtle and indeed more wide-reaching in its imposition of liability. As a comparison:

 • Revenue recovered for all English authorities in 2007-08 as a percentage of revenue billed was 97.1%¹ by the end of March 2008

 • Revenue recovered by water companies as a proportion of that billed in 2007-08 was 91.8%² at financial year end.

The basic approach in Part 1 of the Local Government Finance Act 1992 is to impose liability to pay Council Tax in respect of a “chargeable dwelling” upon an ordered list of categories of persons, the chargeable person being the one who on any particular day falls within the first applicable head in relation to that dwelling set out in Section 6 - see below. The last and thus residual category is that of owner, and that category would not be reached if another person or persons was/were “resident” in the dwelling as a lessee or licensee.

Ordered list of categories of persons or hierarchy of who is responsible for Council Tax on any property – the “the liable person”(from Section 6, Part 1 Local Government Finance Act 1992)

1 Who lives in the property and owns it

2 Who lives in the property and has a lease (this includes “assured tenants” under the Housing Act 1988

3 Who lives in the property and is a “statutory” or “secure” tenant

4 Who lives in the property and isn’t a tenant but has permission to live there

5 Who lives in the property (for example a squatter)

6 Who has a lease of six months or more on the property, but doesn’t live there

7 Who owns the property but doesn’t live there

Section 6 full text

However, by Section 8, a billing authority is given power to determine that in the case of all dwellings of a class prescribed by regulations, the owner of the dwelling or other person of a nature prescribed by regulations shall be liable to pay Council Tax instead of those persons set out in Section 6.

The Council Tax (Liability for Owners) Regulations 1992 (SI 1992 No. 551) make such provision in respect of residential care homes, religious communities, houses in multiple occupation and various other categories. This is the type of legislation that the water industry seeks and needs. See full text

Local government legislation also provides a duty to provide information. Such a duty could also only be imposed by or under the authority of primary legislation.

The Local Government Finance Act 1992 empowers the making of regulations for similar purposes. Thus the Council Tax (Administration and Enforcement) Regulations 1992 (SI 1992 No. 613) imposes duties upon residents, owners and managing agents to respond to notices by the billing authority seeking information about possession and control of particular dwellings.

The same regulations enable one billing authority to require another authority and some other public bodies and officials to provide information about the name, address and any past or present place of residence of any person and the dates during which he is known or thought to have resided at that place. See full text of the regulations

Conclusion

Council Tax legislation appears to 'pave the way' and indeed its existence suggests that there is nothing inherently unreasonable about the water industry’s wishes to be able both to render wider classes of persons liable to pay water and sewerage services and to require provision of information relevant to identifying and tracing those persons to enforce payment.

1. Receipts of annual council taxes collected by end of financial year as a % of net collectable debt – source CLG

2. Revenue outstanding up to 12 months as a proportion of revenue billed in 2007-08? If so, that is currently 8.21% - source Ofwat.