CIS/2901/2004

ANNEXURE

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	The decision of the Income Support Appeal Tribunal dated 26 May 2004 on case No. U/06/062/2003/01778 is erroneous in law.  I set that decision aside and, as empowered by section 14(8)(a)(i) of the Social Security Act (1998) I give my own decision which is:-

	The Secretary of State will re-assess the claimant’s housing costs for the purposes of Minimum Income Guarantee in the light of what I say in paragraphs 27 to 47 below.  Any disagreement as to the correct assessment should be referred to me.  

2.	The Secretary of State appeals, with the leave of the tribunal chairman, against the tribunal’s decision that in calculating the claimant’s entitlement to minimum income guarantee the Secretary of State should include in the claimant’s eligible housing costs the  portion of the service charge payable by the claimant which represents 20% of the cost of staff salaries and 20% of the cost of staff advertisements and that the other items of the service charge allowed by the Secretary of State as eligible housing costs, including the reserve for future maintenance, have been correctly allowed.  

Background to the Appeal

3.	The claimant is resident in a complex in which she owns her own flat on a leasehold title.  Under the terms of the lease she is obliged to pay a service charge which covers services in respect of the buildings, gardens and other ground forming the complex (but not the insides of any dwelling) as well as personal and communal services for the claimant and the other owners.  Broadly speaking those items of the service charge payable in terms of the claimant’s lease which relate to the provision of her accommodation are eligible housing costs for the purposes of income support or minimum income guarantee and those items which relate to services of a welfare nature provided by the ground landlord are met under the Government’s Supporting People Programme which was introduced on 1 April 2003.  The paper published by the Office of the Deputy Prime Minister to explain the programme describes housing related support in this way:-  

	“The primary purpose of housing related support is to develop and sustain an individual’s capacity to live independently in their accommodation.  Some examples of housing related support services include enabling individuals to access their correct benefit entitlement, ensuring they have correct skills to maintain a tenancy, advising on home improvements and accessing a community service alarm.  Other services include a home visit for a short period each week or an on-site full-time support worker for a long period of time.”.

As I understand the background to this case it was expected that the apportionment of the claimant’s service charge as between income support or minimum income guarantee and the Supporting People Programme would be effected simply by the Department for Work and Pensions deciding what were eligible housing costs for the purposes of the Social Security Benefit in any particular case and responsibility for payment of the balance being accepted by the local authority administering the Programme.  The apportionment of the service charge between the two systems was expected to have no effect on the claimant’s financial position.  However, in this, as in some other cases, the claimant found it necessary to appeal the Secretary of State’s decision because the claim for minimum income guarantee includes in the claimant’s housing costs a service charge part of which represents 20% of the salary bill and staff advertising costs of the management company administering the complex of which the claimant’s dwelling is part.  The Secretary of State’s decision rejected that part of the service charge as an eligible housing cost on the grounds that it had not been established that 20% of the company’s salary and staff advertising costs had been incurred for the purpose of providing the residents in the complex with living accommodation.  In the Secretary of State’s appeal against the tribunal’s decision it is argued that the contribution to the reserve fund included in the service charge should also be disallowed as an eligible housing cost.  At the tribunal hearing the claimant was represented by the managing director of the company which is the ground landlord of the complex.  I shall refer to him as “Mr B”.  “Miss L” refers to an adviser on welfare benefits retained by the company to advise on the apportionment of the service charge between minimum income guarantee and the Supporting People Programme.  Miss Findlay is a barrister who advised the company and who appeared as Counsel for the claimant before me.

4.	The tribunal’s explanation for its decision is stated as follows:-

	“The issue.  

	This is straightforward.  In calculating the entitlement of the Appellant to either Income Support (IS) or Minimum Income Guarantee (MIG) it was not clear what proportion, if any of the salary costs and, by natural extension, the staff advertising costs, could be allowed as part of the service charge item.  The Secretary of State had not allowed any of these costs.  The Appellant argued as indicated in the written submission from Miss Findlay and the statement from Ms L that 20% of those costs should be allowed with the remaining 80% being covered by Supporting People.  The tribunal accepted the argument of the Appellant.  There was no other issue apart from the correctness of allowing for future maintenance as part of the service charge.  In particular it was accepted that the charge of an alarm system was the responsibility of Supporting People.  No issue was taken as to whether decisions were supersession decisions or decisions based on new claims:  this was not contentious.

	Other appeals.

	The issue was common to a number of appeals.  The Appeals Service had decided to list 5 appeals as “lead” cases: these were cases where the Appellant lived in different properties.  To all intents and purposes the issue was the same for all appeals although the arithmetic would be different depending on the property involved.  An identical statement has therefore been produced for each of the 5 lead cases.  The number of other appeals had been stayed by the Appeals Service pending the outcome of any further appeal against this decision.  

	History 

	As the tribunal understands matters, until April 1, 2003, all salary costs have been covered by Income Support or MIG.  From that date the responsibility was split between Supporting People and IS/MIG but it was intended that, one way or the other, the Appellant would receive the same amount as previously, albeit from different sources.   On behalf of the Appellant the [management company] had attempted to clarify the different proportions with DWP and Supporting People ready for the change over in April 2003.  The tribunal has had regard to the guidance issue by the Office of the Deputy Prime Minister and the background information provided by Ms Findlay and [Ms L and Mr B].   None of this appears controversial.

	Salary Costs.

	The advice received by the Appellant from [Ms L] and Ms Findlay is clear in that it was felt that 20% of the salary costs should be covered in the IS/MIG calculation with 80% from Supporting People.  This conclusion was reached from studying the job descriptions of the three types of employee: manager; housekeeper and housekeeping assistant.  Those job descriptions were in the tribunal papers.  There was no detailed analysis of how the figures 20/80 split was worked out and [Ms L] who was the architect of the split was unfortunately not able to attend.  The tribunal could not therefore discover how the 20/80 split had appealed to her. [Mr B] suggested in fact that the amount of time spent with the staff with what can be termed housing management issues as opposed to council support was in fact greater than 20/80.  As an example he cited the housing keeping assistants might spend one and a half hours in cleaning the resident’s private accommodation for every one hour engaged in the common parts.  The former would be covered by Supporting People but the latter by IS/MIG.  This suggested a proportion of 60/40.  Similarly he felt that the Manager and Housekeeper might spend 50% of the time on housing management issues.  

	The tribunal decided to accept the 20/80 split for three main reasons.  The first is that this had been accepted by the Secretary of State in other parts of the country. [Mr B] cited that claims dealt with from Wrexham, Northampton and elsewhere in the Midlands had been accepted based on the 20/80 split.  Although these could be wrong the tribunal felt that there was some merit in having a formula which was easy to apply where the circumstances are similar.  As the 20/80 split had been accepted without question elsewhere there was some merit in following that approach.  Secondly there was evidence that some part of the staff costs should be eligible for IS/MIG.  From the information provided it was clear that at least 20% should be eligible to IS/MIG.  Thirdly the split had been suggested by someone who had been closely connected with the transfer from IS/MIG to Supporting People and due weight should be given to that opinion. This opinion was supported by Counsel recognised to be an authority on Welfare Rights generally and Housing Benefit in particular.  

	Staff Advertising.

	Logically it seemed appropriate that if 20% of salary costs were to be allowed then a comparable figure should be allowed for advertising.  

	This had been allowed by the Secretary of State and there was, strictly, no appeal against that part of the decision.  The issue may, however, be treated as raised by the appeal and it has been referred to by the Secretary of State in his submission.  The tribunal considers that there is sufficient detail to justify inclusion of the maintenance from the figures provided and none of the items of expenditure should be excluded.  Counsel’s submission relates to a property at [………] Court but the tribunal considers that the submission is of general application to all the appeals.”.

The Legislation

5.	Section 124 of the Social Security Contributions and Benefits Act 1992 provides that if an eligible claimant for income support (now known as minimum income guarantee in the case of those claimants of pensionable age) has no income the amount of her entitlement will be the aggregate of her applicable amounts or, if she has income, her entitlement will be the amount by which the aggregate applicable amounts exceeds that income.  Subsection (5) provides that the calculation of the amount payable will be as prescribed.  Section 135(1) of the 1992 Act provides that the applicable amount in relation to any income related benefit shall be such amount or the aggregate of such amounts as may be prescribed in relation to that benefit.

6.	Regulation 17 of the Income Support (General) Regulations 1987, (S.I. 1987 No. 1967), insofar as relevant to this appeal, prescribes a claimant’s weekly applicable amount as:

	“-----------the aggregate of such of the following amounts as may apply in his case:

		------------

		(e)	Any amounts determined in accordance with Schedule 3 (Housing Costs) which may be applicable to him in respect of mortgage payments or such other housing costs as are prescribed in that Schedule.  

		------------.”.

7.	Paragraph 15 of  Schedule 3 provides, when read with regulation 17(e), that an eligible housing cost is the interest on a loan which was taken out to defray monies applied for acquiring an interest in the dwelling occupied as the home.   Paragraph 16 of the Schedule, including its heading, is as follows:-

	“Loans for repairs and improvements to the dwelling occupied as the home

	(1)	A loan qualifies under this paragraph where the loan was taken out, with or without security, for the purpose of –

		(a)	Carrying out repairs and improvements to the dwelling occupied as a home;

		(b)	Paying any service charge imposed to meet the costs of repairs and improvements to the dwelling occupied as the home;

		(c)	Paying off another loan to the extent that the other loan would have qualified under head (a) or (b) of this sub-paragraph had the loan been paid off, 

	and the loan was used for that purpose, or is used for that purpose within 6 months of the date of receipt of such further period as may be reasonable in the particular circumstances of the case.

	(2)	In sub-paragraph (1) “repairs and improvements” means any of the following measures undertaken with a view to maintaining the fitness of the dwelling for human habitation or, where the dwelling forms part of a building, any part of the building containing that dwelling –

		(a)	Provision of a fixed bath, shower, wash basin, sink or lavatory and necessary associated plumbing, including the provision of hot water not connected to a central heating system;

		(b)	Repairs to existing heating systems;

		(c)	Damp proof measures;

		(d)	Provision of ventilation and natural lighting;

		(e)	Provision of drainage facilities;

		(f)	Provision of facilities for preparing and cooking food;

		(g)	Provision of insulation of the dwelling occupied as a home;

			(h)	Provision of electric lighting and sockets;

		(i)	Provision of storage facilities for fuel or refuse;

		(j)	Repairs of unsafe structural defects;

		(k)	Adapting a dwelling for the special needs of a disabled person; or

		(l)	Provision of separate sleeping accommodation for children of different 
			sexes aged 10 or over who are part of the same family as the claimant.

	(3)	Where a loan is applied only in part for the purposes specified in paragraph (1), only that portion of the loan which is applied for that purpose shall qualify under this paragraph.”.

8.	Paragraph 17 of Schedule 3 is, insofar as relevant, in the following terms, including its heading:-

	“Other housing costs

	(1)	Subject to the deductions specified in sub-paragraph (2)-----------, there shall be met under this paragraph the amounts, calculated on a weekly basis, in respect of the following housing costs –

		(a)	Payments by way of rent or ground rent relating to a long tenancy and, in Scotland, payments by way of a feu duty;

		(b)	Service charges;

		(c)	Payments by way of rent charge within the meaning of section (1) of the Rent Charges Act 1977; 

		(d)	Payments under a co-ownership scheme; 

		(e)	Payments under or relating to a tenancy or licence of a crown tenant;

		(f)	Where the dwelling occupied as the home is a tent, payments in respect of the tent and the site on which it stands.

		(2)	-------------- the deductions to be made from the weekly amounts to be met under this paragraph are –

		--------------

		(b)	Where the costs are inclusive of ineligible service charges within the meaning of paragraph 1 of Schedule 1 to the Housing Benefit (General) Regulations 1987 (ineligible service charges) the amount attributable to those ineligible service charges or where that amount is not separated from or separately identified within the housing costs to be met under this paragraph, such part of the payments made in respect of those housing costs which are fairly attributable to the provision of those ineligible services having regard to the costs of comparable services;

		(c)	Any amount for repairs and improvements, and for this purpose the expression “repairs and improvements” has the same meaning it has in paragraph 16(2).  

		-------------.”.

9.	Regulation 2 of the regulations defines “dwelling occupied as the home” as –

	“The dwelling together with any garage, garden and outbuildings, normally occupied by the claimant as his home including any premises not so occupied which it is impracticable or unreasonable to sell separately, in particular, in Scotland, any croft land on which the dwelling is situated;”.

	The same regulation defines a “long tenancy” as -

	“------a tenancy granted for a term of years certain exceeding 21 years, whether or not the tenancy is, or may become, terminable before the end of that term by notice given by or to the tenant or by re-entry, forfeiture (or, in Scotland, irritancy) or otherwise and includes a lease for a term fixed by law under a grant with a covenant or obligation for perpetual renewal unless it is a lease by a subs-demise from one which is not a long tenancy;”.

10.	Regulation 10(3)(b)(ii) of the Housing Benefit (General) Regulations 1997 (S.I. 1987 No 1071) provides that where the rent in respect of which a rent rebate or rent allowance is payable includes service charges the rent to be taken into account will be under deduction of an amount in respect of ineligible service charges determined in accordance with Schedule 1 to the Regulations.   The specification of ineligible service charges in paragraph 1 of Schedule 1 is -

	(a)	Charges in respect of day to day living expenses including, in particular, all provision of –

		(i)	Subject to paragraph 1A 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 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;

		(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 in 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 mealtimes 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.”.

The Written Case for the Secretary of State.

11.	The Secretary of State’s representative’s statement of grounds for appealing the tribunal’s decision to a Commissioner and his written submission of 9 August 2004 on the appeal are to the effect that paragraph 17(2)(b) of Schedule 3 to the Income Support (General) Regulations 1987 provides that ineligible service charges within the meaning of paragraph 1 of schedule 1 to the Housing Benefit (Regulations) 1987 are not eligible housing costs for the purposes of the calculation of entitlement to Income Support.   Paragraph 17(2)(c) of Schedule 3 excludes any amount in respect of “repairs and improvements” within the meaning of paragraph 16(2).  Schedule 1 to the Housing Benefit Regulations excludes from eligible costs charges in respect of the provision of nursing care or personal care (including assistance at meal times or with personal appearance or hygiene), charges in respect of general counselling or of any other support services whoever provides those services and charges in respect of any services not specified in sub-paragraphs (a) to (f) which are not connected with the provision of adequate accommodation.

12.	 The tribunal had decided that 20% of staff costs and the associated advertising costs were eligible for Income Support.   The tribunal had also allowed the full amount in respect of the item in the service charge described as “fund for future maintenance”.  With regard to the staff costs the tribunal made insufficient findings in fact to support its conclusion and had given inadequate reasons for its conclusion.  The tribunal had recorded “ball park” estimates from the claimant’s representative without questioning or analysing them.  It seemed to have rejected Mr B’s estimates in favour of a 20/80 split based on anecdotal evidence from elsewhere and the opinion of certain people involved in this field.  That approach was insufficient to determine the issue before the tribunal.  The determination of the question of how much staff time might be spent on eligible activities involved making findings on what staff actually did and then applying specific legal provisions to those facts.  The tribunal had effectively abdicated its judicial role, instead relying on the opinion of others who might not be in an independent position as far as the outcome of the case is concerned.  

13.	The tribunal had cited evidence from the management company that the housekeeping assistants spent one and a half hours in cleaning the residents private accommodation for every one hour engaged on the common parts of the building, a 60/40 split.  It was also suggested that the manager and housekeeper might spend 50% of their time on housing management issues.  There were no other findings in fact as to what the staff actually did which could be regarded as connected to the provision of adequate accommodation within paragraph 1(g) of schedule 1 to the Housing Benefit Regulations.  The job description for the housekeeping assistants referred to cleaning the common areas but also lists a wide variety of other tasks including shopping, ironing, washing clothes, serving meals, cooking and helping with dressing, eating and personal hygiene none of which can be regarded as relevant to the adequacy of the occupiers’ accommodation.  There were no findings in fact as to what the manager and housekeeper actually did which was connected with the adequacy of the accommodation and amounted to 20% of their time.  The job descriptions did not support that allocation of time.  The tribunal had given no reasons to support its conclusion that at least 20% of the staff costs were eligible for Income Support  other than references to figures for cleaning which have clearly been misinterpreted. 

14.	The tribunal’s conclusion that all of the items of expenditure in the fund for future maintenance are allowable was contrary to paragraph 17(2)(c) of schedule 3 to the Income Support (General) Regulations which provides that any amount in respect of such expenditure as is specified in paragraph 16(2) of the same schedule has to be deducted from the service charge.  Replacement of windows is provision of insulation in the terms of paragraph 16(2)(g) of schedule 3 as well as being damp proofing in terms of paragraph 16(2)(c) and provision of natural light in terms of paragraph 16(2)(d).  In any case, the replacement of windows would not come within the meaning of a service charge as defined in paragraph 15 of the appendix to R(IS)4/91 where the Tribunal of Commissioners drew a distinction between charges in respect of services rendered for housing and charges which give rise to contractual duties which relate only to a particular house for the exclusive benefit of its occupier.  In this case at item 5(4) of page 21 of the lease there is a covenant on the management company to keep the structure of the dwellings in good repair but it specifically excludes internal parts of the dwellings.  Consequently any arrangement regarding the internal windows is not binding on all the lessees and does not run with the property.  Roof repairs, it is argued, are excluded as being damp proofing, insulation or repairs of unsafe structural defects.  Some items such as the replacement of tiles could be expected to fall within all three and the tribunal erred in law in failing to make any findings on that aspect of the case. That failure is inconsistent with the Commissioner’s decision in CIS/2132/1998 where the case was remitted for findings. 

15.	 A further criticism of the tribunal’s decision is that it is not clear how charges in respect of the maintenance of structures and areas external to the building such as street furniture, fountain, greenhouse, blocked paved parking and auto vehicle facility relate to the provision of adequate accommodation.  There is also the difficulty that the amount put into the reserve fund for the year represents a balance between income and expenditure and in any year will be the surplus left over after accounting for all of the items of expenditure.  That suggests that the fund could be used for a variety of purposes in the future including a reduction in the service charge for any particular year or years.  Such a reduction would effectively have been partially funded by Income Support payments.  In addition the yearly income includes revenue from a guest room and from interest received.  That is effectively income from sources other than a service charge which is included in the fund.  Without that revenue the fund would be £2,500 less for the year and the amount of the Income Support award should always exclude that amount.

Oral Hearing.

16.	In this case I dispensed with a written response from the claimant’s representative to the submission for the Secretary of State because I had an indication of what that response would be from the copies of the advice given by the welfare benefits adviser and Counsel’s advice to the management company and from the written submission to the tribunal which Counsel had provided.  I heard the appeal on 11 January 2005.  The Secretary of State was represented by Mr J. Maurici of Counsel instructed by the Solicitor to the Secretary of State for Work and Pensions.  The claimant was represented by Miss L. Findlay of Counsel instructed by Mr B.  I am grateful to Counsel for their careful submissions and to those instructing them for their background work.

Mr Maurici’s Submissions for the Secretary of State.

17.	Mr Maurici referred to the skeleton arguments which he had lodged and to the written submission for the Secretary of State.  The crucial issue in the case was the effect of sub-paragraph (f) of Schedule 1 to the Housing Benefit (General) Regulations as enacted since 1 April 2003.  Before April 2003 the ineligibility as a housing cost of general counselling or other support services was subject to the exception of such counselling or other support services as related to the provision of adequate accommodation or were provided by the landlord in person or somebody employed by the landlord.  The enactment of the current form of sub-paragraph (f) related to the setting up of the Supporting People Programme in 2003.  The Supporting People Programme was authorised by section 93 of the Local Government Act 2000.  The Secretary of State paid a grant to local authorities to enable them to contribute to the cost of welfare services.  

18.	The instant case was concerned with the border line between housing management costs and support costs.  There were no statutory definitions, only the guidance to be found in “What is Supporting People?” issued by the Office of the Deputy Prime Minister and the Housing Benefit and Council Tax Benefit Circular JB/CTB.  The disagreement between the claimant and the Secretary of State was about the demarcation line between the costs relating to accommodation and those relating to support services.  The approach of the claimant’s representatives to the establishment of the demarcation line, as that approach is explained in the submission for the claimant to the tribunal, was wrong.  Contrary to what was argued for the claimant the Secretary of State was not fixed with the burden of establishing that any particular proportion of the service charge paid by a claimant was in respect of ineligible costs.  

19.	The claimant’s and similar cases were distinguishable from that of the Social Fund claimant in Kerr v Department for Social Development [2004] 1 WLR and [2004] UKHL 23.  In that case the House of Lords decided that when claiming a Social Security benefit it was for the claimant to produce the information in his possession to enable the claim to be properly adjudicated.  It was for the Secretary of State to establish by inquiry that an exception to a general rule of entitlement excluded a claimant from entitlement in a particular case if the relevant information was ascertainable by the Secretary of State and not within the knowledge of the claimant.  That, said Mr Maurici, did not apply in this case.  The apportionment of the service charge paid by the claimant between accommodation costs and support costs was within the knowledge of or ascertainable by the claimant.  It was not something within the knowledge of the Secretary of State.

20.	In any case the authority which was more in point was R. v Stoke-on-Trent City Council, ex p. Highgate Projects 29 H.L.R.271 at 278 in which the Court of Appeal said that it was for the claimant to establish that a service charge was not ineligible by virtue of paragraph 1 of Schedule 1 to the Housing Benefit General Regulations.  In this case there were two major shortcomings in the case put to the tribunal and in the tribunal’s reasons for accepting the case.   The amount claimed in respect of the service charge included 20% of the management company’s salaries bill and the reserve fund of £32,317 for future maintenance.  To establish that 20% of the salaries bill was not an ineligible service charge in terms of Schedule 1 to the Housing Benefit (General) Regulations, particularly heads (f) and (g) of that paragraph, the tribunal would have needed to have had an account of the total amount of time spent by all of the employees on work which did not come under any of the heads of ineligibility and which was connected with the provision of adequate accommodation.  The tribunal would also have required to have heard evidence of what the reserve fund was to be used for.  The tribunal did not have that evidence.  What the tribunal did have was Ms L’s written advice as to how the total service charge should be apportioned between accommodation costs and support costs but there was nothing in that written advice to indicate that it was based on a calculation of the hours spent by each employee on services related to the provision of accommodation as against the other services which the company provided.  The tribunal had a copy of the advice given to the management company by Counsel but the charges had not been apportioned as advised by Counsel.  Moreover, Mr B told the tribunal that he thought that the staff time spent on work related to the provision of accommodation amounted to more than 20% of the total.   Consequently the tribunal had no basis in fact for its acceptance of the 20%/80% apportionment.  The tribunal’s decision was erroneous in law for lack of relevant findings in fact and should be set aside. 

Miss Findlay’s Submissions for the Claimant. 

21.	Miss Findlay said that there were 3 areas of challenge to the tribunal’s submissions.  As to the burden of proof, Lord Hope said at paragraph 16 on page 1377 of the Kerr report that a claimant is to be given a reasonable opportunity to establish his claim.  It was for the Department to ask the questions.  The claimant was not to be faulted if the questions were not asked.  That was what had been submitted to the tribunal.   The claimant in this case was not to be faulted if after she gave information it emerged that there may have been other information which was relevant.  In this case the Department had accepted that the claimant was liable for a service charge.  Therefore it was for the Department to ask questions to elicit what parts of that charge were ineligible.  It was not for the claimant to prove a negative.   For example, the projected replacement of roofing tiles in 80 years was not a remedy for a structural defect.  Paragraph 10 of the appendix to CIS/1460/1995 etc. supported her view that once an amount had been accepted as a service charge it was for the Secretary of State to prove that it was caught by one of the exceptions. 

22.	 Paragraph 3 of the Secretary of State’s decision maker’s note for the tribunal (on document 7 of the bundle) was wrong in saying that since the introduction of the Supporting People Programme staff salaries could no longer be included as an eligible service charge for income support or minimum income guarantee purposes.  Paragraph 5 of the minute from the Adjudication and Constitutional Issues Division of the Department for Work and Pensions to the relevant local Pensions Service (Document 30 of the bundle) gave no explanation of its assertion that 20% of the staff salaries were ineligible as a service charge.   That was all the tribunal had by way of an explanation of the Secretary of State’s position on the matter.  Mr B had told her that the Department had not expanded on that paper but the tribunal had Ms L’s apportionment based on the job descriptions.  Ms L had made a distinction between housing management tasks and support for individuals and on that basis arrived at the 20%/80% split.  The tribunal also had the written statement of 23 May 2004 to the tribunal (documents 180 and 181 of the bundle) in which Ms L explained her experience and how she had helped to “size the pot” when the Supporting People Programme was being devised.  On document 181 she gave more explanation of her breakdown and made the point that the breakdown would vary from scheme to scheme and that she was giving an average.  Faced with a non-specific challenge from the Department to the claimant’s figures the tribunal had acted reasonably on the evidence from Ms L which was bolstered by Mr B’s evidence that the proportion of staff activity related to the provision of accommodation could be as much as 40%.  

23.	The claimant had done what was required of her according to the Kerr judgment.  She had provided job descriptions and taken advice on the apportionment of staff costs as between accommodation and personal support.  In the absence of any further questioning by the Department she could do no more.  The manager’s job description was at document 140 of the bundle.  It was clear that the job included housing management tasks and that some of it was purely support.  Ms L’s analysis had not gone into each in detail.  She had looked across the board and found the split to be in general 20%/80%.  Individual staff members may have had a different apportionment of their time but 20%/80% was the general apportionment.

24.	Miss Findlay said that the Department was arguing that the purposes of the reserve fund were not clear and that, therefore, it was not eligible.  In its correspondence with Mr B. the Department had accepted the reserve fund as an eligible service charge but asked the tribunal to consider it.  That request was not dealt with in detail by the presenting officer at the hearing.  Mr B had explained that the reserve fund was the amount which the surveyors had calculated had to be set aside against future maintenance.  Therefore the Department’s questions were answered in great detail.  Document 125 of the bundle was the summary of the detailed analysis of the anticipated maintenance requirements and its cost distributed over the relevant future years.  The estimated provision was more than was being charged to the owners.  In the past the company had been able to charge less than the estimated annual provision because it had income from other sources and the estimate was speculative in any case.  Again the claimant had provided all the information which could be expected of her in response to the questions which were put to her.  The only specific reason given by the Secretary of State’s decision maker for challenging the eligibility of the reserve fund was that the claimed service charge included also an element for sundry repairs and equipment.  The tribunal chairman had, therefore, before him significant material from the claimant and queries from the Department as to whether or not it would qualify as an eligible housing cost.  At document 190 of the bundle the tribunal chairman had recorded those points.  The tribunal’s decision was adequate given the information which the tribunal had and the scant argument from the Department.  The claimant had satisfied the criterion set in the Kerr case.  

25.	The third ground of the Secretary of State’s challenge to the tribunal’s decision related to administrative charges.  There was no evidence on which those charges would be ineligible as a service charge.  The 3 categories of staff were specified in the budget at document 14 of the bundle.  There was no reason to disturb the award already made and never the subject of an appeal.  

Mr Maurici’s Response

26.	 Mr Maurici said, referring to the Kerr case, that the Secretary of State had asked the right questions.  It would be seen from document 26 of the bundle that the response to those questions was a copy of what was in effect Ms L’s opinion.  The Secretary of State’s decision maker did not consider that to be enough.  As would be seen from paragraph 5 of document 30 of the bundle the Adjudication and Constitutional Issues Branch had made the point that the management company had accepted that housekeeping assistance and the staff functions in relation to community life were support services but that the company had not established why 20% of the staff salaries should be accepted as an eligible service charge.  The Kerr decision was not against him because the relevant questions had been asked by the Department.  Kerr stated only a general rule and focused on what was in the claimant’s knowledge.  It was accepted by the Secretary of State that not all the staff costs were excluded from eligibility.  The problem was the lack of information to establish the split between eligible housing costs and the housing support costs.   What could be gleaned from Ms L’s opinion was that some staff time is spent on housing management but there was no explanation of how that amounted to 20% of staff time.  The tribunal had accepted that there was no such explanation but, nevertheless, the basis of the tribunal’s decision was Ms L’s evidence.  That was opinion evidence but this was a matter on which opinion evidence was not enough.  There were 3 different types of employee but nothing to explain why it was thought that 20% of their time was allocated to accommodation related services and 80% to support services.  The approach of the claimant’s representatives seemed to him to be an attempt to devise a formula which could be applied across the board.  That was not good enough.   Also the reserve fund included a sum which was not housing costs. 

Consideration.

27.	For the reasons which follow I have concluded that there is no adequate evidential basis for the tribunal’s finding that 20% of the management company’s expenditure on salaries is attributable to staff activities relevant to accommodation related services. The tribunal’s decision is, therefore, erroneous in law and it is on account of that error that I have set the decision aside.  Rather than remit the case to a new tribunal for a rehearing I have made my own decision to the effect that the claimant’s eligible housing costs should be recalculated in the light of what I say in the following paragraphs.

28.	The largest item of expenditure on the management company’s budget for the year 2003 to 2004 at document 14 of the bundle is £94,000.25 for salaries.  I agree with Mr Maurici that a sufficiently accurate assessment of how much of that expenditure is attributable to accommodation related services cannot be made by simply looking at job descriptions.  It is necessary to establish the number of hours per week spent by the employees on providing those services.  The part of the salaries bill which is attributable to the provision of accommodation related services can then be calculated.  The staff administration costs such as staff advertising, employers liability insurance and personnel management attributable to accommodation related services should be calculated by applying to them the ratio of hours spent on accommodation services to hours spent on support services.  That will be, I have little doubt, a very time consuming process for the management company.   If there is no empirical method of apportioning bank charges, stationery, postage, audit fee, accountancy charges and the management fee those costs should all be apportioned in the same ratio.   That is what should have been done in this case.  I agree with Miss Findlay that the Secretary of State could have asked the questions which would have elicited the information needed to make the necessary calculations but I do not agree that the Secretary of State’s failure to do so entitled the tribunal, in the absence of something better from the parties’ representatives, to rely on the evidence provided by Ms L, especially when that evidence was not consistent with Mr B’s evidence.  As I shall explain below, I do not think that the House of Lords decision in Kerr relieved the tribunal of the duty of making its own inquiries or directing the Secretary of State to make further inquiry in to the calculation of the claimant’s housing costs.  

29.	I do not think that the Kerr decision is completely in point.  It dealt with a question as to the proper adjudication of entitlement to a funeral payment under regulation 7 of the Social Fund Maternity and Funeral Expenses (General) Regulations 1987 (S.I. 1987 No. 481).  Paragraphs (1) and (2) of that regulation specify conditions, some cumulative and some in the alternative, which a claimant must satisfy to be entitled to a payment.  Paragraphs (3) and (7) then specify circumstances, some of which would be within the knowledge of the claimant and some not necessarily so, in which the claimant will not be entitled to a payment even if he does satisfy paragraphs (1) and (2).   However, paragraph 17 of schedule 3 to the Income Support (General) Regulations is not concerned with entitlement to benefit but with the calculation of the amount of the entitlement, which amount might be nil.  Sub-paragraph (1) specifies payments made by a claimant which will qualify as housing costs.  Sub-paragraph (2) specifies the amounts which should be deducted from the costs allowable under sub paragraph (1). It does that by reference to paragraph 16(2) of the same schedule and to paragraph 1 of schedule 1 to the Housing Benefit Regulations.  The information needed to apply both sub-paragraphs (1) and (2) of paragraph 17 will be in the knowledge of the person making the claim for Income Support or Minimum Income Guarantee. 

30.	 I agree that in Kerr the House of Lords said that adjudication on claims for Social Security benefits is an inquisitorial process and that it is for the Secretary of State to investigate facts not readily ascertainable by the claimant which, if established, would disqualify the claimant from entitlement by virtue of some exception to the entitling statutory provision: but although the House did say that in the absence of evidence that the exceptions applied to the particular claimant concerned benefit should be paid to him, it seems to have said that because there was no request for the case to be remitted for readjudication (Lord Hope of Craighead in paragraph 19 of the report).  That does not authorise the award of benefit in default of proper investigation by the Secretary of State.  Contrary to what Miss Findlay argued, both in the written submission which she prepared for the tribunal and before me, the tribunal should not have accepted Ms L’s estimate of the proportion of the staff costs which was attributable to accommodation related services.  In the absence of sufficiently detailed evidence of  the amount of time devoted by staff to those services the tribunal should have adjourned the hearing for the claimant’s representative to supply the Secretary of State with the necessary information about staff activity and for the case to be relisted when the parties had either come to an agreement as to the allowable service charge or had identified a question of fact or law on which they could not agree.

31.	The tribunal was not wrong in law to decide that the claimant’s contribution to the reserve fund is a service charge from which nothing is to be deducted in respect of anything specified in paragraph 16(2) and which is wholly aggregable as an eligible housing cost.  That is subject to the qualification that it would seem from the surveyor’s schedule of future maintenance costs (documents 108 to 125 of the bundle) that Block E of the complex includes staff rooms.  The maintenance costs of that block, both current and projected, will have to be analysed in order to exclude, in compliance with paragraph 17(2)(b) and paragraph 1 of Schedule 1 to the Housing Benefit (General) Regulations, the proportion of the expenditure on the block which corresponds to the extent to which the block is used for purposes other than the provision of adequate accommodation for the owners of the dwellings in the complex.

32.	Unlike the Housing Benefit Regulations, the Income Support Regulations do not define “service charge”.  For the purposes of the latter regulations a service charge is, as decided in R(IS) 4/91, a charge which the claimant is obliged to pay in terms of her occupancy agreement for services rendered in terms of that agreement.  In this case the claimant is obliged to contribute to the reserve fund by the terms of clauses 4(1) and 5 (13) of and schedule 3 to the lease under which she holds her flat.  Her contribution to the fund is ineligible as a housing cost only to the extent to which deductions have to be made from it to comply with sub-paragraph (2) of paragraph 17 of schedule 3 to the Income Support (General) Regulations.

33.  No part of the projected maintenance costs itemised in the surveyors’ schedule of future maintenance works constitutes repairs and improvements within the meaning of paragraph 17(2)(c) of Schedule 3 as read with paragraph 16(2).  There is nothing in the surveyors’ schedule to indicate that what is contemplated is anything more than the prudent renewal of protective decoration or the replacement of unserviceable or potentially unserviceable items, such as window frames or roofing tiles, with similar but serviceable items.

34.	Moreover, paragraphs 16 and 17 have a history.  They were originally paragraphs 8 and 9.  The repairs and improvements referred to in paragraph 8(1) were defined in sub-paragraph (3) as meaning:-

	“Major repairs necessary to maintain the fabric of the dwelling occupied as the home and any of the following measures undertaken with a view to improving its fitness for occupation.”

There followed a list of works similar to that in the current paragraph 16(2) but some of which were termed provisions, some improvements and some provision or improvement.  There were specified also the “installation” of a bath etc and “damp proofing measures”.  

35.	With effect from 10 January 1994 paragraph 8(2) was amended to extend the definition of repairs and improvements to include work done to the building of which the dwelling forms part.  That had the effect of increasing what could be financed under paragraph 8(1) but restricting what could be financed under what is now sub-paragraph (1)(b) of paragraph 17 as read with sub-paragraph (2)(c).  Until that amendment the cost of works to repair or improve the common parts of the building were not  “repairs and improvements” as defined because the “dwelling” as defined in regulation 2 did not (and still does not) include the common parts of a multi-dwelling building (CIS/616/92).

36.	The current schedule 3 was enacted with effect from 2 October 1995 by regulation 2 of the Social Security (Income Support and Claims and Payments) Regulations 1995 (SI 1995 No 1613) as read with schedule 1 to those regulations.  Paragraphs 8 and 9 are now paragraphs 16 and 17.    As will be seen from my paragraph 10 above, the reference to major repairs to the fabric of the dwelling or the building of which it forms part which was in 8(2) does not appear in 16(2).  That restricts the scope of what can be financed under paragraph 16(1) but as there is no corresponding recasting of what is now paragraph 17(2)(c) the cost of repairs or improvements to the fabric of the dwelling or the building of which it forms part are not deductible under that sub-paragraph from the service charge which the claimant is required to pay in terms of her lease.

37.	 In paragraph 20 of his submission the Secretary of State’s representative argues that the costs of the replacement of windows and roof repairs provided for in the reserve fund are deductable from any service charge as being in respect of the provision of insulation, natural light, damp proofing or the repair of unsafe structural defects.  I do not agree.  

38.	 Although the Commissioner who decided CIS/2132/1998 entertained the argument that by preventing the entry of rainwater a roof prevents damp, he decided that damp proofing is not the predominant purpose of a roof and that although a roof repair might have the predominant purpose of preventing damp a roof renewal would not.  He rejected the argument that in the particular case before him the roof renewal in question was carried out because of a dangerous structure, there being no evidence to that effect.  He does not seem to have said anything about what might constitute the provision of insulation or the provision of natural light.  I do not disagree with what is said in CIS/2132/1998 but I go further.  

39.	The question of the eligibility of the contributions to the reserve fund is determined by the itemised purposes of the fund.  The repair of unsafe structural defects is not one of the purposes of the fund to which the claimant is required to contribute.  In fact the effect of the works which are to be funded out of the reserve would be the avoidance of the need for the repair of unsafe structural defects.  For example, timely replacement of slackening roofing tiles will prevent the roof timbers becoming rotted to the point of collapse through water penetration. 

40.  “Damp proofing” and “insulation” are to my mind terms of art in the building trade which have found their way into ordinary language.  As used in regulation 16(2) the former is, I think, limited to measures taken to prevent rising damp or damp from condensation in an existing building.  The latter is limited to such things as the installation in an existing building of double glazing, loft insulation and cavity wall insulation to reduce the loss of heat from the building.  None of those measures is specified in the surveyors’ schedule of works to be financed by the reserve fund.  The repeated use of the word “provision” in the list of specified repairs and improvements in paragraph 16(2)is significant.  It seems to me to imply that what will be a loan eligible under paragraph 16(1) or a charge deductible under paragraph 17(2)(c) is a loan or a charge in respect of the cost of the provision of something not already in existence or the replacement of something which no longer functions.  In the case of the claimant’s dwelling, damp proofing and insulation may or may not already be in place but there is nothing in the surveyors’ schedule about providing them for the first time at some future date.  As there are windows there is natural light already and no need to provide it.  What the surveyors envisage is the maintenance in good order of that part of the structure of the building which does provide natural light, namely, the existing window.

41.  The windows lighting the claimant’s flat are included in the premises demised to the claimant and the claimant is obliged by the terms of the lease to maintain, renew and replace them where necessary but that obligation is to maintain etc. to the satisfaction of the management company and the landlord.  Those two and the other owners all have an interest in the proper maintenance of the claimant’s windows because they are part of the fabric of the whole building and their dilapidation could adversely affect the whole building.  The management company is entitled by clause 5(18) of the lease to see to the discharge of the claimant’s and the other owners’ maintenance obligations on their behalf and the claimant and the others are obliged to pay the resultant service charge, whether that is a charge for work done or a contribution to the reserve for future works.  It seems to me therefore that the contribution to the reserve in respect of future window repairs is a service charge as defined in paragraph 15 of the appendix to R(IS) 4/91 and, contrary to the Secretary of State’s representative’s argument, does not fall outwith that definition even although it is a charge in respect of work on the claimant’s dwelling.

42.	A further point about the reserve fund is this.  As the learned Commissioner said in paragraphs 2 and 10(i) of CIS/15036/96, income support (in this case minimum income guarantee) is intended to meet a claimant’s essential revenue outgoings.  The costs which are specified as deductible charges by paragraph 17(2) of schedule 3 as read with paragraph 16(2) are in the nature of capital costs.  The list in paragraph 16(2) seems to me to reflect the definition of fitness for human habitation in section 97 of the Housing Grants, Construction and Regeneration Act 1996 as read with section 604 of the Housing Act 1985.  It is, for the most part, a list of capital works which would be eligible for grants under the 1996 Act.  Provision against future essential capital works will normally be made out of revenue.  Left to his own devices an owner-occupier of a dwelling accumulates or should accumulate, out of income a reserve for future essential capital works. However, in England there is normally nobody who can oblige him to do that and there is, therefore, no payment which he makes which could come within the R(IS)4/91 definition of a service charge.  That may change as commonhold develops as an alternative to leasehold as the title to dwellings in multiple occupancy buildings.  In Scotland there may be cases where the feu-disposition or the deed of conditions improves an obligation on the proprietors of a dwelling to contribute to a reserve fund for future capital works.

43.	The tenant of rented property and the owner with a leasehold title are in a different position. The landlord of tenanted property pitches the rent at a level which allows him to accumulate a reserve out of rents received.  The rent is an essential outgoing for the tenant which will be taken into account in the assessment of the tenant’s entitlement to Housing Benefit even although it will, in part at least, be used to finance the landlord’s future capital outlays.  A leasehold owner occupier in the claimant’s position has no choice but to contribute at regular intervals to the reserve fund set up by her management company and those contributions are an essential revenue outgoing for her.  It is unlikely that the legislature intended that housing costs which can be met for tenants by way of Housing Benefit can not be met by way of Income Support or Minimum Income Guarantee for owner-occupiers who are equally obliged to incur those costs as a condition of occupancy of their dwellings.  In my view, what is deductible in terms of paragraph 17(2) is the current or recent capital cost of works described in paragraph 16(2) incurred within the time prescribed by paragraph 16(1), not the claimant’s current contributions to a reserve against such capital costs in the future.  That is in so far as any of the contingencies itemised in the reserve fund schedule correspond to the paragraph 16(2) list, which I do not think any do in this case.

44.	As to the Secretary of State’s representative’s misgivings about the method of creating the reserve fund, I do not think that there is anything wrong.  At first I thought that the method adopted resulted in the owners being charged twice but that is not so.  The surveyor has estimated that the fund should be accumulated at the rate of £37,996.67 per year.  In the 2003/2004 budget the owners are expected to pay a total of £178,120 in service charges.  Expenditure net of the amount treated as the reserve fund is estimated at £148,303.  The surplus of service charges over that net expenditure is £29,817 and that has been applied as the owners’ contributions to the reserve.  There have then been added to those contributions the receipts from the guest room and bank interest amounting in total to £2,500 so that the whole of the surplus of income over expenditure is to be devoted to the reserve.  As the unspent receipts from the service charges (£29,817) and the £2,500 both belong to the owners there is no reason why that money should not be applied to the reserve fund if the owners agree.  The fact that the fund includes money raised otherwise than by payments from the owners does not result in anything being funded by income support or minimum income guarantee which should not be so funded.  Indeed, reducing the amount which the claimant has to find for the fund by her share of the £2,500 reduces her eligible housing costs in her claim for benefit.

45.	A further misgiving which the Secretary of State’s representative expresses about the reserve fund is that it could be applied for purposes other than those specified in the surveyor’s schedule including a reduction in annual service charges in future years.  In theory that is correct but there is nothing in paragraphs 16 or 17 to prevent such diversion of the fund.  In practice the owners would be unlikely to agree to the diversion of the fund unless assured that there would be money to meet all contingencies.  Also, paragraph 2 of the third schedule to the claimant’s lease provides that surpluses carried forward from previous years will not include the reserve fund. 

46.	In paragraph 21 of his submission the Secretary of State’s representative queries how expenditure on some of the “externals”, for example street furniture, block paved car-parking and fountain maintenance, can be regarded as relevant to the adequacy of accommodation.  Those would seem to him to be amenities.  I think that question is answered in paragraph 11 of the appendix to CIS/1460/1995 and in the definition of “dwelling occupied as the home” in regulation 2 of the Income Support regulations which I quote in paragraph 9 above.  Apart from the staff rooms (to the extent that those rooms are occupied by members of staff engaged in providing support rather than accommodation services), the claimant’s accommodation includes all the grounds and buildings available to the claimant as of right under the lease, such as dining rooms, the guest room, the laundry, gardens, car parks, walkways or any other part of the complex which are used by the claimant for purposes for which she would normally use part of her dwelling if she were not in sheltered accommodation.  If she were not living in the accommodation in question she would use her house and curtiledge to eat either alone or with guests, accommodate visitors over night, walk or sit in the garden and provide car parking for visitors.  However, the Secretary of State and the claimant’s representative have to consider if there are any parts of the complex which are used wholly or partly for the provision of services specified in  paragraph 1(a) to (g) of schedule 1 to the Housing Benefit (General) Regulations.  That will give rise to some fine distinctions between, say, the dining room in which the owners eat meals and those relating to the kitchen in which the meals are cooked and between the parts of the laundry, if any, in which the owners do their own laundry and those parts which are used by staff to provide a laundry service for the owners.

47.	 As explained in CIS/1460/1995, to the extent that charges for any of the amenities which are not ineligible by virtue of paragraph 1 of Schedule 1 are thought to be in respect of amenities which are too elaborate to be funded wholly or in part by income support or minimum income guarantee, public funds are protected by paragraph 10 (now paragraph 13) of Schedule 3 to the Income Support (General) Regulations. That provision restricts eligible housing costs to those payable in respect of accommodation which is not unreasonably expensive or extensive or in an unreasonably expensive location.

48.	For the foregoing reasons the Secretary of State’s appeal succeeds, in as much as I have set the tribunal’s decision aside, and my decision and directions are in paragraphs 1 and 33 to 45 above.

	(Signed)	R J C Angus
		Commissioner

	(Date)	5 April 2005