Landlord Granted Dispensation from Consultation Requirements for Long-Term Energy Agreement

OUTCOME: Allowed

Case Reference : MAN/00BN/LDC/2022/0036

Property : [NAME], [ADDRESS] [POSTCODE]

Applicant: [redacted] : [APPELLANT]

Respondents : [redacted]

Type of Application : Landlord & Tenant Act 1985 – Section 20ZA

Tribunal Member : Judge L [NAME] of determination : 25 October 2022

Date of Decision : 20 December 2022

_______________________________________________

DECISION ____________________________________

© CROWN COPYRIGHT 2022

FIRST - TIER TRIBUNAL [NAME] (RESIDENTIAL PROPERTY)

2 Application

1. [APPELLANT] applies to the Tribunal under Section 20ZA of Landlord and Tenant Act 1985 (the Act) for dispensation from the consultation requirements of Section 20 of the Act and the Service Charges (Consultation Requirements)(England) Regulations 2003 (SI 2003/1987) to enable it to enter in to a long-term energy agreement of 24 months in relation to [NAME], [ADDRESS] [POSTCODE] (the Property).

2. The Respondents are [NAME] at the Property who were identified in lists submitted to the Tribunal by the Applicant, together with a specimen lease.

Grounds and Submissions

3. The application was received by the Tribunal on 4 May 2022.

4. The Applicant is the Freeholder of the building.

5. The Tribunal did not carry out an inspection but understands that the Property

consists of 2 buildings, one of 82 single room units and one of 148 single room

units. In addition, in the larger of the 2 buildings, there are 2 one-bed self-

contained units. Both buildings are registered with Manchester City Council as

HMO housing. All have associated shared kitchen and bathroom facilities.

6. On 1 August 2022 a Tribunal Legal Officer made directions requiring the service of

documents by the Applicant on each of the Respondents. The directions provided

that in the absence of a request for a hearing the application would be

determined upon the parties’ written submissions.

7. In response to directions the Applicant has provided a statement of case with

supporting documents.

8. The Applicant’s statement of case sets out a chronology of events and the reasons

for the application to the Tribunal for dispensation from the consultation

requirements.

9. The contract for supply of electricity ended on 31 May 2022. A new contract was

required to avoid defaulting into an expensive standard variable rate per kilowatt of

electricity supply. Research into a new contract began in April 2022. The cost per

kilowatt was rising week by week. UK electricity prices are linked to the wholesale

gas price on the wholesale market. Significant high demand from China and the

Ukraine war was pushing up prices and prices were set to significantly increase

throughout 2022/23.

10. Initial investigation indicated that a standard 12 months’ contract would be the

most expensive. Quotations were requested from [NAME] for prices based

on 12/24/36 months’ contracts. Appendix A to the Applicant’s statement of case

shows the estimated and actual costs for [NAME] for the year 2021-22.

Appendix B provides a summary of the accepted quotation from SSE. There were

issues that limited the options for suppliers:

a) [NAME] is treated as a business supply, not as residential, therefore

any Ofgem price capping would not be applicable.

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b) [NAME] exceeds 307,000 kwh per year, which limited the number of

supply companies that would quote prices.

c) Electricity prices were increasing weekly, so it was important to obtain a new

contract as soon as possible.

d) Cost differences between 12 month’s contract and longer were significant. A 24

month’s contract was sought on the advice that price pressures would decrease after

24 months which would provide the most flexibility.

11. The escalating market price for electricity made it important that a contract be

negotiated as soon as possible. It was considered that a consultation exercise would

take too long and therefore be detrimental to the [NAME]. Drax and SSE were

identified as the preferred suppliers. However, there was speculation that Drax

would not survive in its current format. It was at the centre of an international court

case for misleading statements on climate change emissions. A contract with SSE

was therefore agreed from 1 June 2022.

12. The Tribunal did not receive any submissions from a [NAME].

Neither the Applicant nor a Respondent requested a hearing.

13. The Tribunal convened without the parties to make its determination on 25 October

2022.

Law

14. Section 18 of the Act defines “service charge” and “relevant costs”.

15. Section 19 of the Act limits the amount payable by the lessees to the extent that the

charges are reasonably incurred.

16. Section 20 of the Act provides:

(1) Where this section applies to any qualifying works or qualifying long term agreement, the relevant contributions of tenants are limited in accordance with subsection (6) or (7) (or both) unless the consultation requirements have been either-

(a) complied with in relation to the works or agreement, or (b) dispensed with in relation to the works or agreement by (or on appeal from) a tribunal

(2) In this section “relevant contribution”, in relation to a tenant and any works or agreement, is the amount which he may be required under the terms of his lease to contribute (by the payment of service charges) to relevant costs incurred on carrying out the works or under the agreement

(3) This section applies to qualifying works if relevant costs incurred on carrying out the works exceed an appropriate amount.

(4) The Secretary of State may by regulations provide that this section applies to a qualifying long term agreement- (a) if relevant costs incurred under the agreement exceed an appropriate amount,

4 or (b) if relevant costs incurred under the agreement during a period prescribed by the regulations exceed an appropriate amount.

(5) An appropriate amount is an amount set by regulations made by the Secretary of State; and the regulations may make provision for either or both of the following to be the appropriate amount- (a) an amount prescribed by, or determined in accordance with, the regulations, and (b) an amount which results in the relevant contribution of any one or more tenants being an amount prescribed by, or determined in accordance with the regulations.

(6) Where an appropriate amount is set by virtue of paragraph (a) of subsection (5), the amount of the relevant costs incurred on carrying out the works or under the agreement which may be taken into account in determining the relevant contributions of tenants is limited to the appropriate amount.

(7) Where an appropriate amount is set by virtue of paragraph (b) of that subsection, the amount of the relevant contribution of the tenant, or each of the tenants, whose relevant contribution would otherwise exceed the amount prescribed by, or determined in accordance with, the regulations is limited to the amount so prescribed or determined”

17. In the event the requirements of section 20 have not been complied with, or there is

insufficient time for the consultation process to be implemented, then an application

may be made to the First-tier Tribunal pursuant to section 20ZA of the Act.

18. Section 20ZA of the Act provides:

(1) Where an application is made to a tribunal for a determination to dispense with all or any consultation requirements in relation to any qualifying works, or qualifying long term agreement, the tribunal may make the determination if satisfied that it is reasonable to dispense with the requirements (2) In section 20 and this section- “qualifying works” means works on a building or any other premises, and “qualifying long term agreement” means (subject to section (3) an agreement entered into, by or on behalf of the landlord or a superior landlord, for a term of more than twelve months.

Tribunal’s Conclusions with Reasons

19. I have determined this matter following a consideration of the Applicant’s case but

without holding a hearing. Rule 31 of the Tribunal Procedure (First-tier Tribunal)

([NAME]) Rules 2013 permits a case to be dealt with in this manner

provided that the parties give their consent (or do not object when a paper

determination is proposed). In this case, the Applicant has given its consent and

the Tribunal has not heard from a Respondent in response to the application.

Moreover, having reviewed the case papers, I am satisfied that this matter is

indeed suitable to be determined without a hearing. Determining this matter

does not require me to decide disputed questions of fact.

5 20. The Tribunal is being asked to exercise its discretion under section 20ZA of the Act.

Section 20ZA (1) provides the Tribunal may do so where “if satisfied that it is

reasonable to dispense with the requirements”. 21. The Tribunal, having considered the submissions made by the Applicant, is satisfied

there is good reason to dispense with the Consultation Requirements. The Applicant

wishes to mitigate the cost to the Respondents that will arise from any increase in

the price of electricity and, in the current economic climate, such increase is likely

to be considerable. 22. In [COMPANY] v Benson [2013] UKSC 14 it was determined that

a Tribunal, when considering whether to grant dispensation, should consider

whether the tenants would be prejudiced by any failure to comply with the

Consultation Requirements. Balancing the need for urgent action against

dispensing with statutory requirements devised to protect service charge paying

[NAME], I conclude the urgency outweighs any identified prejudice.

Dispensation from consultation requirements does not imply that any resulting

service charge is reasonable.

23. The granting of dispensation does not affect the Respondents’ rights to the

challenge the reasonableness or the payability of the service charges under a

separate application pursuant to section 27A of the Act once the proposed costs

have been incurred.

Order

24. The application to dispense with the consultation requirements imposed by Section

20 of the Landlord and Tenant Act 1985 (“the Act”) and The Service Charges

(Consultation Requirements) (England) Regulations 2003 to enable the Applicant

to enter into a qualifying agreement is granted. This is in respect of their current

energy contract that runs from 1 June 2022 for 24 months and relates to

[NAME], [ADDRESS] [POSTCODE].

[NAME] Tribunal Judge 25 October 2022

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