R(IS) 19/93

Judge N. T. Hague 	CIS/201/1989
30.10.91
Housing costs ‑ house insurance - whether a service charge
The claimant is an owner occupier who has to pay for house insurance under a covenant in his building society mortgage. He also has a covenant in the mortgage that he will keep the house in good repair and condition. The adjudication officer issued a decision to disallow the house insurance as an eligible housing cost on the grounds that there is no provision in the Income Support (General) Regulations 1987 to make such an award. On appeal the claimant also requested payment of housing costs in respect of expenditure on maintenance and repairs to the property. The tribunal in upholding the decision found the appellant was not entitled to housing costs in respect of repairs or house insurance. The claimant appealed to the Commissioner.
Held that:
1.	sums expended on repairs and maintenance are not eligible housing costs under sub‑paragraphs (a) to (g) of paragraph 1 to Schedule 3 of the Income Support (General) Regulations 1987 (para. 9);
2.	the payment for house insurance is not a service charge and is therefore not an eligible housing cost. The obligation to make the payment does not arise from the claimant’s interest or estate in the property; it arises from his mortgage which is merely the security for the money borrowed (para. 14).

DECISION OF THE SOCIAL SECURITY COMMISSIONER
1.	My decision is that neither the sums payable by the claimant under his building society mortgage in respect of house insurance nor the sums expended by him on repairs and maintenance of his house can be taken into account under regulation 17(1)(e) and Schedule 3 of the Income Support (General) Regulations 1987 in ascertaining his entitlement to income support.
2.	The claimant is in receipt of income support. He is the owner/occupier of a house, subject to a building society mortgage. No other aspects of his income support apart from those mentioned above are in dispute.
3.	The appeal is against the unanimous decision of the Liverpool social security appeal tribunal dated 26 April 1989, and is with the leave of the chairman of the tribunal. The chairman’s note of evidence contains the following:
“The appellant attended and explained that he was compelled to pay the insurance premium to his building society, that under the previous regulations he was allowed a sum to cover both these premiums and repairs, and that he was disadvantaged as against a council tenant whose rent was allowed in full and included an amount for both insurance and repairs to that property. The PO stated that the appellant previously received supplementary benefit of £74.60 and now received under income support the sum of £78.40.”
The tribunal’s findings of fact read as follows:
“The tribunal took note of the facts recorded in the appeal papers and the submissions made at the hearing.”
The tribunal decided that the claimant was not entitled to housing costs in respect of house insurance or repairs and gave its reasons as follows:
“The tribunal considered regulation 17(e) of the General Regulations and paragraph 1, Schedule 3 to the same regulation and held that house insurance premiums and payment for repairs were not specifically provided for therein. Nor could it be held that such payments were ‘analogous’ under Schedule 3 para. 1(h) to the General Regulations.”
4.	The claimant has appealed on the ground that:
“The tribunal has not given proper reasons for its decision. I am unaware from the reasons why the evidence I gave to the tribunal was rejected …”
In his submission, the adjudication officer now concerned submitted that the tribunal’s decision was in breach of regulation 25(2)(b) of the Social Security (Adjudication) Regulations 1986, which required that the tribunal shall:
“(b)	include in the record of every decision a statement of the reasons for such decision and of their findings on questions of fact material thereto …”
I agree with that submission, at any rate as regards the findings of fact, for there are really no such findings at all. I must set the tribunal’s decision aside on that ground.
5.	However, under section 101(5)(a) of the Social Security Act 1975 as amended, a Commissioner has power in such a case:
“(ii)	if he considers it expedient, to make such findings [i.e. findings of fact] and to give such decision as he considers appropriate in the light of them.”
I consider that it is expedient for me to make findings of fact in this case, for that would obviate an unnecessary reference back to a tribunal, and I can make such findings on the evidence given at the tribunal and from the appeal papers, without any injustice to either party.
6.	I make the following findings of fact, which are in favour of the claimant and in accordance with the evidence he gave to the tribunal: 
(1)	The outline facts are as stated in paragraph 2 above.
(2)	There is a convenant in the claimant’s building society mortgage requiring him to pay the society annual or other periodic sums in respect of the insurance of the house. (Such a covenant is commonplace.)
(3)	The claimant has duly complied with that covenant by paying such sums to the society. The amount due in 1989/90 was £67.40.
(4)	There is a covenant in his building society mortgage requiring him to keep the house in good repair and condition. (Again, such a covenant is commonplace.)
(5)	The claimant has duly complied with that covenant and expended money in keeping the house in good repair and condition.
(6)	The claimant’s supplementary benefit did include a sum in respect of house insurance and maintenance.
7.	The housing costs which can be taken into account in calculating income support are set out in regulation 17(e) and Schedule 3 of the Income Support (General) Regulations 1987 (“the Income Support Regulations”). These are limited to the costs (described in a side‑note as “eligible housing costs”) listed in paragraph 1 of Schedule 3, which (as amended) are:
“(a)	mortgage interest payments;
(aa)	interest payments under a hire purchase agreement to buy the dwelling as a home;
(b)	interest on loans for repairs and improvements to the dwelling occupied as the home;
(c)	payments by way of rent or ground rent relating to a long tenancy and, in Scotland, payments by way of feu duty;
(d)	payments under a co‑ownership scheme;
(e)	payments under or relating to a tenancy or licence of a Crown Tenant;
(f)	service charges;
(g)	where the dwelling occupied as the home is a tent, payments in respect of the tent and the site on which it stands;
(h)	payments analogous to those mentioned in this paragraph.”
8.	The Income Support Regulations are made under the Social Security Act 1986, which substantially repealed the Supplementary Benefit Act 1976 with effect from 11 April 1988. As from that date, the regulations set out above replaced similar provisions as to housing costs in the Supplementary Benefit (Requirement) Regulations 1983. The latter did include “maintenance and insurance” and (in regulation 16 thereof as subsequently amended) gave to owner/occupiers an allowance of £1.95 per week in respect of those outgoings. That is what was presumably referred to by the claimant in his evidence to the tribunal. However those provisions as to “maintenance and insurance” are not reproduced in the list of “eligible housing costs” set out above or elsewhere in the Income Support Regulations. On this point, I refer to the observations of a tribunal of Commissioners in the appendix to two reported decisions (on the meaning in another factual context of “service charges”) in R(IS) 3/91 and R(IS) 4/91. In paragraph 9 of the appendix, the tribunal say:
“The normal canon of construction is that a material change from one version of legislation to another evinces an intention of the legislature to make a change in effect. Whilst it would not be right to say that Income Support Regulations are but another version of the Requirements Regulations, in an updated form, nonetheless there is a sufficient practical relationship between the two for us to feel bound to conclude that the omission was deliberate and that it was therefore intended that such charges should be covered by the Income Support Regulations only if they fell squarely within some express provision thereof.”
I follow and apply those observations.
9.	I deal first with the question of sums expended on repairs and maintenance. (This question was not the subject matter of any original determination by the adjudication officer, and it appears to have been raised for the first time at the tribunal. The tribunal made a decision on it, and as this is an appeal from the tribunal decision, I consider that I must do likewise.) In my judgment, it is clear that these sums do not fall within any of sub‑paragraphs (a) to (g) of paragraph 1 of Schedule 3 to the Income Support Regulations, and are not analogous to any of the payments mentioned in that paragraph. The express inclusion under sub-paragraph (b) of interest on loans for repairs and improvements makes it impossible to contend that the sum expended themselves are also included by way of analogy. Moreover, even if a service charge includes a sum in respect of repairs and improvement to the property in question, that sum is now excluded from being an “eligible housing cost” by paragraph 9(2)(c) of Schedule 3, which confirms the intention that expenditure on repairs and improvements is to be excluded. I add that it makes no difference that the expenditure is necessary to comply with the covenant in the mortgage; in that respect, the position is no different from any capital repayments which may be required by the mortgage, but which are clearly not “eligible housing costs”.
10.	I turn to the question of sums paid to the building society in respect of house insurance. The only possible relevant headings in the list of “eligible housing costs” set out in paragraph 7 above are “(f) service charges” and “(h) payments analogous to” service charges. As to the latter heading, the tribunal of Commissioners in the decisions R(IS) 3/91 and R(IS) 4/91 mentioned above said in paragraph 13 of the appendix thereto:
“For our part we have great difficulty in envisaging anything which would be akin or have a partial likeness to service charges which were not in fact so called, but were housing costs analogous to service charges and thus form part of the applicable amount. It rather seems to us that such items either would or would not be service charges.”
I respectfully agree with and apply those observations. I consider that, if house insurance expenditure is to qualify at all, it must be as “service charges”.
11.	That expression is not defined in the Income Support Regulations. However, it has been the subject of detailed consideration in the tribunal of Commissioners’ decisions mentioned above. After considering the relevant provisions of the regulations (including para. 1 of Schedule 1 to the Housing Benefit (General) Regulations 1987, which are referred to in para. 9(2)(b) of the Income Support Regulations), the relevant authorities and the submissions made to them by counsel on both sides, the tribunal expressed their conclusions as follows:
“15.	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 onto 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.
16.	But that is not the end of the matter. Even although a charge may fulfil the definition which we have just set out it may still fail to qualify as an eligible service charge being excluded by paragraph 1(g) of Schedule 1 to the Housing Benefit Regulations, because it is not connected with the adequacy of the accommodation.”
One of the decisions concerned recurring charges for the emptying of a cesspit payable by a owner/occupier who was not on mains drainage. The tribunal remitted that case back for further findings of fact, but said at paragraph 17 of the appendix:
“If, as rather appears from what is contained in Mr. Rowland’s written submission, the arrangements giving rise to the recurring charges are contained in a private contract made by the claimant with a particular organisation limited to the purpose of emptying his septic tank then that will not qualify, according to our definition above, as a housing service charge. But if it is imposed upon him and others under, or by, the terms on which he holds his property, and that could include a statutory undertaker under a duty to empty septic tanks in the claimant’s area and for which it is required to make a charge, which he is then obliged to suffer and pay, then the result would be otherwise on the positive side at least.”
12.	The tribunal thus drew a clear distinction between (1) charges which are payable as an incident of (i.e. an obligation arising from) the owner’s estate or interest in the property, and (2) charges which arise in some other way. The most obvious examples of charges in category (1) are those arising under the tenant’s convenants in a lease, but there are others. The tribunal, in paragraph 12 of the appendix, listed some examples under Scots law, but examples can be found in English law also e.g. where the freehold has been acquired under the Leasehold Reform Act 1967 and there is a scheme under section 19 of that Act in operation, or under the principle of Halsall v. Brizell [1957] Ch 169, or under statute. The distinction drawn by the tribunal between charges of this kind in category (1) and other charges in category (2) may seem legalistic, but it is a clear and logical one.
13.	The service charge payable under many leases includes an element in respect of insurance of the building. That clearly comes within category (1) above, and there is nothing in the regulations (and in particular para. 9 of the Income Support Regulations applying Schedule 1 of the Housing Benefit (General) Regulations) to exclude it from being an “eligible housing cost”. In addition, it has been held in the Commissioner’s decision on file CIS/109/1989 [R(IS) 4/92] that an insurance charge payable under a lease, even if it is not included in a service charge provision, is also a “service charge”. I respectfully agree with that decision, for (i) it involves payment for a service (the insurance of the property) effected by the landlord and (ii) it comes within category (1) above.
14.	The present case however is different. It can be said that the payment is for a service i.e. the insurance of the property by the building society, albeit that such insurance may be done mainly for the benefit of the building society so as to preserve the value of its security. But it is not an obligation arising from the claimant’s interest or estate in the property. The obligation arises from his mortgage, which is something different, being merely the security for money borrowed. It arises as a result of the claimant’s financial arrangements, not out of his ownership of the property itself. It thus falls within category (2) above and is not a “service charge”.
15.	In essence, the payment is no different from a house insurance premium paid under an ordinary contract between an owner/occupier and his insurance company. That has been held by the Commissioner in an unstarred decision on file CIS/17/1988 not to constitute a “service charge”. I agree with his conclusion. However, in company with the Commissioner in CIS/109/1989 [R(IS) 4/92], in paragraph 15 of his decision, I dissent from the suggestion which appears to be made in paragraph 6 of the unstarred decision that house insurance is not “connected with the provision of adequate accommodation” for the purposes of paragraph 1(g) of Schedule 1 to the Housing Benefit (General) Regulations; and further I do not think it matters whether the payment is made voluntarily or not.
16.	The claimant has contrasted his position with that of a council tenant. Such a tenant, he says, pays a rent which includes something in respect of the maintenance and management of his property. There are on the file some local authority housing revenue accounts produced by the claimant which illustrate that, and I am prepared to accept that “management” may well include insurance. Yet a council tenant may well have the whole of his rent covered by housing benefit. I follow the point, but the position is similar to that of along lease tenant who pays a service charge which includes an element of insurance or who simply pays an insurance charge under the terms of his lease (see para. 13 above). These are liabilities arising from the tenant’s interest or estate in the property (and so in category (1) above) and not otherwise, as in the claimant’s case. Furthermore even if there were an anomaly (and I do not think there is), I can of course only apply the Income Support Regulations.
17.	For these reasons, although setting aside the tribunal’s decision, I find that notwithstanding his obligations under his building society mortgage, neither the claimant’s payment of an insurance premium to the building society nor his expenditure on maintenance and repairs is within the list of “eligible housing costs” in paragraph 1 of Schedule 3 of the Income Support Regulations. Neither of them can therefore be taken into account in assessing his income support. In the result, therefore, I dismiss the appeal,

Date: 30 October 1991	(signed) Judge N. T. Hague	Deputy Commissioner