WAVERLEY is one of up to 70 local authorities and housing associations that could have to repay millions of pounds to tenants in water charges following a landmark legal case.

In a test case brought by a London council tenant in March, the High Court found Southwark Council, which has an “almost identical” contractual relationship with Thames Water to Waverley, had overcharged some housing tenants for their water between 2010 and 2013.

Southwark collects payment for water and sewerage services from 37,000 of its tenants on behalf of Thames Water. The court case hinged on whether the council was acting as an ‘agency’ for Thames Water or a ‘customer’ under the Water Resale Order 2006, in which case they were reselling water services and should have passed on savings to tenants.

Under the arrangement, Southwark pays Thames Water a quarterly lump sum, which is reduced by five per cent to reflect voids and 18 per cent for the council’s commission fee.

However, these reductions were not reflected in tenants’ water bills, with residents charged the full rate. The court found that Southwark Council should have passed this money on to tenants.

As a result, Southwark Council is likely to have to pay 37,000 tenants a total of £2.3m for each year between 2010 and 2013.

Waverley announced on September 2 that the Southwark ruling could have “significant implications” and it was investigating if any Waverley tenants had been overcharged in order to calculate any potential financial liability.

Like Southwark, Waverley uses the annual commission it receives from Thames Water to form part of its Housing Revenue Account budget and fund landlord services.

A recent Freedom of Information request revealed that Waverley pays water bills on behalf of around 2,800 tenants across the borough (58 per cent of all Waverley tenants), all of whom could be due a payout if the borough council is found to have overcharged.

Waverley’s director of finance and resources, Graeme Clarke, said: “Waverley Borough Council collects water payments from tenants in unmetered properties on behalf of Thames Water and receives a commission of eight per cent for the provision of billing and collection services.

“In light of the case, Waverley Borough Council felt it prudent to review its contractual arrangement with Thames Water and has since found that its agreement is almost identical to the one held by Southwark Council.  There could therefore be significant implications for Waverley as a result.

“This council has always regarded itself as acting as an agent for Thames Water and has never sought to vary the billing amount for each tenant, as calculated by Thames Water. However, the Southwark case concluded that, due to the nature of the agreement, councils have been acting as a water re-seller as defined by the Water Resale Order 2006. While this is still a legitimate service for the council to provide, this ruling could affect the charges made to customers.

“We are now in the process of assessing whether any of our tenants have been overcharged; a detailed financial analysis will need to be conducted so we can calculate any potential liability and decide on our next steps.

“We will also be reviewing our arrangement with Thames Water to consider what revisions and amendments need to be made.”

Thames Water told the High Court in March it had “similar arrangements” with 69 councils and housing associations. It is not clear if these individual arrangements are likely to lead to a repayment to tenants as a result of the ruling.

A Thames Water spokesman said: “Waverley Borough Council bill and collect water and waste water charges from their tenants on our behalf.

“Following the Southwark ruling, we’ve been working with a number of individual Local Authorities and Housing Associations – reviewing contracts to ensure our customers have paid and pay the correct amount.”

A Waverley spokesman added that the council has historically paid water bills on behalf of tenants ever since water supplies were privatised by the Thatcher government in 1989.

All tenants have the option to opt out and pay their bills directly to Thames Water, but the majority prefer to receive a single bill combined with their rent. This also offers the flexibility of paying bills weekly rather than quarterly as Thames Water requires.

The Waverley spokesman added the period in which any payouts, if deemed necessary, would be backdated would be set by the Limitation Act 1980.

It is expected to be around six years.