Stainsby is being kind to the benefit assessors' of the LA that I guess that you are referring to (judging by the location of your HA), (you should read their Bfi report for how NOT to administer HB). As someone with intimate experience of that LA, I know that training is almost non-existent, and the assessors are very pressured. Quantity not quality is what goes... that is why some of your cases are being paid with water rates, and some not.
If however you write to the LA concerned, (even if it is not the one you have most dealings with), and tell them about this mistake, not only will it be official (LA) error, but they will not be able to recover the overpayment from you, (even where you have been receiving the HB directly, and even if you signed one of those "I agree to re-pay any overpayment" letters that the LA uses), as per reg 101 (1) (b) (the 'blameless landlord' reg). This reg also carries the right of appeal to a Tribunal.
In addition, as any overpayment is covered by reg 99 (2) (official error overpayments), there is no way that any 'reasonable' person claiming benefit could have such an intimate knowledge of reg 10, and so the LA will not be able to recover the overpayments from the tenants as they could not sensibly argue that the benefit claimant's "could reasonably have been expected to know of the overpayment" as these overpayments are clearly LA error (so long as they had the breakdown of the rental amounts showing the water charge).
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