[2024] UKUT 55 (LC)

I will begin by explaining the significant features of the legislation which applies to the determination of pitch fees on park homes sites. Since the English appeal started first in time I will refer principally to the English legislation. Fortunately, although different statutes apply on each side of the border, there is only one relevant difference in the substance of the applicable law which is that, at the relevant time, the inflation index used for sites in England was the retail prices index, while in Wales it was the consumer prices index. I was told that this difference had changed recently and CPI is now the standard measure of inflation for sites on both sides of the border.

The law regulating protected sites in England is found in two separate statutory regimes. Subject to irrelevant exemptions, section 1 of the Caravan Sites and Control of Development Act 1960 requires a site licence to be obtained from the local authority for use of land as a caravan site. A site licence can be granted subject to conditions (section 5) and almost invariably it will be.

The Mobile Homes Act 1983 (“the 1983 Act”) governs the terms on which someone may station a mobile home on land and occupy it as their only or main residence. It does so by implying standard terms into every agreement between the owner of a site and the occupier of a pitch entitling the occupier to station their home on the pitch (section 2). These terms were amended in 2013 and regulate every important aspect of the relationship between owner and occupier including the duration and termination of pitch agreements, the maintenance and repair of the mobile homes and sites, the payment and review of pitch fees, the sale of homes and so on.

When a site owner and an occupier first agree a fee for the right to station a home on a pitch, there is no restriction on the amount they are able to agree. The only relevant implied terms are concerned with the annual review of the pitch fee and not with its original determination; market forces govern that bargain, but any subsequent increase is limited by the statutory implied terms.

The implied terms in Chapter 2 of Schedule 2 to the 1983 Act (both in their original form and as amended by the Mobile Homes Act 2013) provide for pitch fees to be reviewed annually, either by agreement or by the FTT (referred to in the Act as the “appropriate judicial body”) on the application of the owner or the occupier. By paragraph 16 of Schedule 2, if the parties cannot agree, the pitch fee may only be changed by the FTT if it “considers it reasonable for the pitch fee to be changed and makes an order determining the amount of the new pitch fee.”

The procedure for obtaining a new pitch fee is specified in paragraph 17 of Schedule 2. The pitch fee can be reviewed annually at the review date. The owner must give notice of its proposed increase at least 28 days before that date, and if the occupier agrees to the proposal the proposed new pitch fee becomes payable. If the occupier does not agree, the owner may apply to the FTT for an order determining the amount of the new pitch fee.

Paragraphs 18, 19 and 20 of Schedule 2 explain what is to be taken into account in determining a new pitch fee. These provide the only guidance to the FTT on what it is to do if, having received an application from an owner or occupier, it considers it is reasonable for the pitch fee to be changed. Unfortunately, they are not as informative as they might have been.

Omitting irrelevant parts, paragraph 18 now says this:

Paragraph 18 came into force in its current form on 26 May 2013. In summary, therefore, on a pitch fee review in England, “particular regard” is to be had to three matters: (1) sums expended by the owner on improvements since the last review date; (2) any deterioration in the condition, and any decrease in the amenity, of the site or adjoining land occupied or controlled by the owner since 2013 “in so far as regard has not previously been had to that deterioration or decrease for the purposes of this subparagraph”; (3) any reduction in, or deterioration in the quality of, services supplied by the owner since 26 May 2013 to which regard has not previously been had; and (4) any direct effect of legislation which has come into force since the last review date on the costs payable by the owner on the maintenance or management of the site.

Paragraph 19 then identifies certain costs which may not be taken into account in determining a new pitch fee (including costs of expanding the site or obtaining a site licence).

Finally, paragraph 20 trumps all the complexity that has gone before by creating a statutory presumption, as follows:

“(A1) In the case of a protected site in England, unless this would be unreasonable having regard to paragraph 18(1), there is a presumption that the pitch fee shall increase or decrease by a percentage which is no more than any percentage increase or decrease in the retail prices index calculated by reference only to—

(a)

the latest index, and

(b)

the index published for the month which was 12 months before that to which the latest index relates.”

(The reference in paragraph 20(A1) to the retail prices index was changed to the consumer prices index with effect from 2 July 2023.)

These provisions, in their current and original forms, have been considered by the Tribunal in a number of cases. In most cases the issue has been whether some other factor, not mentioned in paragraph 18(1), may be relied on to justify an increase in the pitch fee which is different from the relevant change in RPI. That is not the question which arises in these appeals, but it is helpful to mention three of these cases and to note what they say about how the statutory presumption operates and what standard is to be applied in determining a new pitch fee when the presumption is displaced.

In John Sayer’s Appeal [2014] UKUT 0283 (LC), at [21]-[23], which concerned charges for the supply of water and focussed on an earlier version of these paragraphs, I explained that the statutory implied terms do not provide a comprehensive code for the determination of the pitch fee. Their effect is that, unless a change in the pitch fee is agreed between the owner of the site and the occupier, the pitch fee will remain at the same level unless the tribunal considers it reasonable for the fee to be changed. If the tribunal decides that it is reasonable for the fee to change, the amount of the change is in its discretion, provided that it must have "particular regard" to the factors in paragraph 18(1), and that it must not take into account of the costs referred to in paragraph 19. It must also apply the presumption in paragraph 20(1) that any increase (or decrease) shall be no greater than the percentage change in the RPI unless that would be unreasonable having regard to the factors in paragraph 18(1). In practice that presumption usually means that annual RPI increases are treated as a right of the owner, but the trigger for any change is that it must be reasonable for there to be a change:

“The overarching consideration is whether the [tribunal] considers it reasonable for the pitch fee to be changed; it is that condition, specified in paragraph 16(b), which must be satisfied before any increase may be made (other than one which is agreed).”

The Tribunal considered the proper approach to pitch fee reviews again in Britanniacrest Ltd v Bamborough [2016] UKUT 0144 (LC). The issue was whether the site owner could include within the pitch fee an administration fee associated with the provision of utilities. The Tribunal (Martin Rodger QC Deputy President and Mr Peter McCrea FRICS) identified three basic principles that shape pitch fee reviews: annual review, no change without agreement unless the FTT considers it reasonable and determines the amount of the new pitch fee, and the presumption of change in line with RPI. We continued:

“These three principles… do not provide a benchmark by reference to which a new pitch fee is to be determined, such as the amount which might reasonably be expected to be agreed as the pitch fee in the negotiation of a new pitch agreement in the open market. The FTT is given a very strong steer that a change in RPI in the previous 12 months will make it reasonable for the pitch fee to be changed by that amount but it is provided with only limited guidance on what other factors it ought to take into account. It is clear, however, that other matters are relevant and that annual RPI increases are not the beginning and end of the determination, because paragraphs 18 and 19 specifically identify matters which the FTT is required to take into account or to ignore when undertaking a review.”

After referring to specific features of paragraph 18(1) the Tribunal continued at [31]:

“…The fundamental point to be noted is that an increase or decrease by reference to RPI is only a presumption; it is neither an entitlement nor a maximum, and in some cases it will only be a starting point of the determination. If there are factors which mean that a pitch fee increased only be RPI would nonetheless not be a reasonable pitch fee as contemplated by paragraph 16(b), the presumption of only an RPI increase may be rebutted and a greater increase, one which raises the pitch fee to the level which the FTT considers reasonable, will be permissible.”

The Tribunal concluded its review of the implied terms in Britanniacrest by agreeing with a submission by counsel for the site owner that:

“the FTT has a wide discretion to vary the pitch fee to a level of a reasonable pitch fee taking into account all of the relevant circumstances, and that the increase in RPI in the previous 12 months is important, but it is not the only factor which may be taken into account.”

As for the operation of the presumption, at [48] Judge Robinson explained that the presumption of change in line with RPI was the starting point “unless this would be unreasonable having regard to paragraph 18(1)”. If it would be unreasonable to apply the presumption, because of one of the factors mentioned in paragraph 18(1), the presumption does not arise; that was not strictly a case of the presumption being displaced, but rather of circumstances in which it would not apply at all. Where it applied, the presumption was still only a presumption, and it could be displaced by other factors, not mentioned in paragraph 18(1) (of which an example was given at [54]) if those other factors were of sufficient weight or importance that they outweighed the presumption of RPI. To have that effect the relevant factor, not mentioned in paragraph 18(1), would have to something “to which considerable weight attaches”, which was for the tribunal to assess in each case (at [50]).

In summary, where none of the factors in paragraph 18(1) is present, and no other factor of sufficient (considerable) weight can be identified to displace the presumption of an RPI increase, the task of the tribunal is to apply the presumption and to increase the pitch fee in line with inflation. Where one of the factors in paragraph 18(1) is present, or where some other sufficiently weighty factor applies, the presumption does not operate or is displaced. Then the task of the tribunal is more difficult, because of the absence of any clear instruction on how the pitch fee is to be adjusted to take account of all relevant factors. The only standard which is mentioned in the implied terms, and which may be used as a guide by tribunals when they determine a new pitch fee, is what they consider to be reasonable. Paragraph 16 provides that, if the parties cannot agree, the pitch fee may only be changed by the FTT if it “considers it reasonable for the pitch fee to be changed and makes an order determining the amount of the new pitch fee.” The obvious inference from paragraph 16 is that the new pitch fee is to be the fee which the tribunal considers to be reasonable.