Tribunal Grants Wandsworth Permission to Renew Energy Contracts Without Leaseholder Consultation

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00BJ/LDC/2020/0056 HMCTS code (paper, video, audio) : P: PAPER REMOTE Property : Various leasehold properties in the London Borough of [NAME] Applicant : [redacted] : [RESPONDENT], Solicitors Respondent : [redacted] who benefit from the communal supply of electricity and/or gas Representative : In person Type of [NAME] : Dispensation with Consultation Requirements under section 20ZA Landlord and Tenant Act 1985 Tribunal member : Judge Robert Latham Venue : 10 [ADDRESS] [POSTCODE] Date of decision : 30 July 2020

DECISION

The Tribunal grants this [NAME] to dispense with the consultation requirements imposed by section 20 of the Landlord and Tenant Act 1985 in respect of the proposed renewal of is Framework Agreement with LASAR for the electricity and gas contracts for the period 1 October 2020 to 30 September 2024.

2 Covid-19 pandemic: description of hearing This has been a remote hearing on the papers which has not been objected to by the parties. The form of remote hearing was P:PAPERREMOTE. The Directions provided for the [NAME] to be determined on the papers unless any party requested a hearing. No party has requested a hearing. The applicant has filed a bundle of documents which extends to 111 pages. This includes the written representations which have been received from the [NAME]. The [NAME]

1. By an [NAME], dated 1 April 2020, the London Borough of [NAME] (“[NAME]”) seeks a rolling dispensation from the consultation requirements of Section 20 of the Landlord and Tenant Act 1985 (“the Act”) in respect of qualifying long term agreements for the procurement of energy contracts for gas and electricity for the period 1 October 2020 to 30 September 2024. The [NAME] relates to 13,966 [NAME] [NAME] who are required to pay for the provision of electricity and 668 [NAME] who are required to pay for the provision of gas through their service charge. The [NAME] is accompanied by a witness statement by [NAME], a Project Officer in [NAME]’s Energy Management Team 2. [NAME] is already part of a Framework Agreement with LASER to supply gas and electricity. The gas and electricity contracts are due to renewed in October 2020 and need to be extended. Dispensations have already given by the Tribunal: (i) June 2009 (LON/00BJ/LDC/2009/0021) for gas; (ii) February 2010 (LON/00BJ/LDC/2010/0017) for electricity; (iii) August 2012 (LON/00BJ/LDC/2012/0061) for electricity and gas; and (iv) August 2016 (LON/00BJ/LDC/2016/0051) for electricity and gas.

3. On 12 May 2020, the Tribunal issued Directions. Pursuant to these Directions, (i) By 1 June, [NAME] had placed on its website a copy of the [NAME] form with all supporting documentation including a list of all [NAME] (but excluding any personal data) and the Directions. The website link is https://www.[NAME].gov.uk/housing/leasehold- consultation-on-supply-of-gas-and-electricity-contract/. (ii) By 1 June 2020 [NAME] had sent the [NAME], by email, hand delivery or first class post a letter providing details of the website where all the documents relating to the [NAME] could be accessed. The letter also stated that if the [NAME] so

3 requested by 15 June, [NAME] would send them a copy of the [NAME] form together with the supporting documents.

4. By 10 July, any [NAME] who opposed the [NAME] was directed to complete a Reply Form which was attached to the Directions and to send [NAME] a statement in response to the [NAME], together with and documents upon which they wish to rely. They were also asked to specify whether they required an oral hearing. 5. [NAME] have produced a Bundle of Documents in support of this [NAME]. This includes the ten responses which they have received (at p.66 to 111). [NAME] state that they have also received 183 emails and 180 telephone calls seeking clarification or amending their contact details. The Responses 6. The following [NAME] have responded: (i) [NAME] [NAME] (p.66-8): On 1 June, [NAME] completed a Reply Form. No grounds for opposing the [NAME] are specified.

(ii) [NAME] [NAME] (p.69-71): On 2 June, Ms [NAME] requested a word version of the documents. These were provided. On 14 June, Ms [NAME] completed a Reply Form. No grounds for opposing the [NAME] are specified.

(iii) Battersea High Street Residents Association ([NAME]) (p.72- 79): On 6 June, Mr [NAME] completed a Reply Form. He stated that he was completing it in a personal capacity. He raised a number of queries and questioned how [NAME] would ensure that the arrangement would secure best value for the [NAME]. On 16 June, [NAME] responded to these queries. Mrs [NAME], a Senior Consultation Officer in [NAME] & Regeneration Department, highlighted the passages in Mr [NAME] statement which sought to illustrate the savings which had been made since 2009 through the arrangement. [NAME] would continue to carry out price monitoring exercises. Whilst the agreements between [NAME] and LASER could not be disclosed as these contained commercially sensitive information, the authority would be willing to make these available to the tribunal. On 14 July, Mr [NAME] confirmed that he was not requesting an oral hearing. However, a number of members of the Association had raised concerns with him and they would be keeping an eye on costs,

(iv) [NAME] (p.80-87): On 16 June, Mr [NAME] completed a Reply Form. He queried why the communal electricity charges in his block were so high. Mrs [NAME] responded providing details of the block electricity charges.

4 (v) [NAME] [NAME] (p.88-89): On 16 June, Ms [NAME] completed a Reply Form. No grounds for opposing the [NAME] are specified.

(vi) [NAME] (p.90-100): On 15 June, Mr [NAME] e [NAME] complained about the costs charged for the communal supply to his two-storey maisonette in Tooting. He lives in the first floor flat whilst a housing association hold the lease of the ground floor. Between them, the two lessees have to pay £150 a year for one hallway light which is on a 20 second timer switch. On 9 July, [NAME], the Estate Manager, responded providing a breakdown of the meter and a summary of the costs for 2018/9. On 22 July, she provided further information.

(vii) [NAME] (p.101-104): On 3 July, Ms [NAME] wrote to [NAME] objecting to any attempt to dispensing with the consultation requirements. She complained about the proposed secrecy which she suggested breeds corruption. She also complained that she had not been provided with full details of the proposal. She did not complete a Reply Form. On the same day, Mrs [NAME] responded clarifying the nature of the [NAME] and pointing out where details of the proposal could be found on [NAME]’s website. She was reminded that if she objected to the proposal, she should complete the Reply Form and return it by 10 July. Ms [NAME] did not do so.

(viii) [NAME] (p.105-7): On 3 July, Mr [NAME] completed a Reply Form. Although this stated that he had sent a statement to [NAME], no statement was enclosed. On 6 July, Mrs [NAME], [COMPANY], responded clarifying the nature of the [NAME].

(ix) [NAME] (p.108): On 8 July, Mr [NAME] sent [NAME] an email stating that he opposed the proposal due to cost. No Reply Form has been completed.

(x) [NAME] (p.109-111): On 9 July, Miss [NAME] completed a Reply Form. She stated that she had sent a statement to [NAME]. No statement was enclosed.

The Law 7. The only issue which this Tribunal is required to determine is whether or not it is reasonable to dispense with the statutory consultation requirements, and if so, whether to impose any conditions. This [NAME] does not concern the issue of whether any service charge costs will be reasonable or payable. However, the statutory consultation procedures are part of the statutory armoury to protect [NAME] from paying excessive service charges.

8. Section 20ZA (2) of the Act defines a 'qualifying long term agreement' as an agreement entered into by a landlord for a term of more than 12 months.

5 9. Section 20(1), limits the service charge which a landlord can recover under such an agreement unless it has complied with the consultation requirements set out in Schedule 2 of the Service Charges (Consultation Requirements) (England) Regulations 2003.

10. A landlord may make an [NAME] under section 20ZA (1) to dispense with some or all of the consultation requirements and the Tribunal may make the determination if satisfied that it is reasonable. The Supreme Court decision in [COMPANY] v [NAME] and others [2013] UKSC 14; [2013] 1 WLR 854 is the leading authority on dispensation. In summary, the burden rests on a [NAME] to establish that real prejudice would arise from the landlord's failure to comply with the statutory consultation requirements. If such prejudice is established, dispensation may be refused or conditions may be imposed. The Background 11. In his witness statement (at p.13-47), Mr [NAME] describes the background to the current Framework Agreement for the supply of both the gas and electricity. Energy markets are complex and volatile, [NAME] them liable to sudden price fluctuations, which are often linked to real or perceived threats to supply and demand that can significantly change prices, on a daily basis. The key variant is the wholesale price.

12. Because of its volatility, the energy market cannot be index linked and the true cost savings accrue directly from the lower absolute outlay. Given the nature of the energy market and the influencing factors such as the increasing move to renewables, carbon reduction measures, taxation and increased reliance on energy imports, it is very unlikely that the opportunity for any absolute cost reduction will occur.

13. For many years, central government has recommended that all public sector bodies buy energy through an aggregated, flexible, risk managed framework, managed by [NAME]: a central purchasing body (“CPB”). The effectiveness of the access agreement/call-off contract, is derived from the ability of public sector authorities to work together and collectively buy energy on the wholesale market, through a CPB that aggregates and purchases gas and electricity commodities where market conditions are favourable. The ability to purchase “chunks” of energy over longer periods of time avoids the high risk strategy of single day purchasing, typically associated with fixed price, fixed period, tendering. 14. [NAME]’s CPB is LASER (Local Authority South East Region) who are active in planned government initiatives and have been assessed and approved as a best practice energy procurement service provided by the OGC led collaborative energy category and London Energy Project. The contract arrangement has been let in compliance with EU Regulations.

6 15. [NAME] has been a part of the framework agreement since 1 October 2009 and considers that the agreement has been very effective in mitigating the effects of a changeable energy market. LASER report an annual saving to the London Borough of [NAME] of £564k, on an expenditure of approx. £9.7m a year, on their flexible energy procurement framework 16. Two external organisations have benchmarked LASER prices: (i) The Major Energy Users Council: for the year 2018/19, against their average market prices, LASER’s were 15% less for electricity and 12.5% less for gas. This equates to a cost avoidance of £693k.

(ii) The Department for Business, Energy and Industrial Strategy published figures which show that, for the year ending September 2019, LASER’s prices were 7.5% lower than average consumer prices.

The Tribunal’s Decision 17. The renewal of the agreement with LASER constitutes a 'qualifying long term agreement' as it is for a period of 4 years. The Tribunal is satisfied that it is reasonable to grant dispensation. [NAME] consider that the current Framework Agreement with LASER secures best value for its [NAME]. The tribunal accepts that it is not practical for [NAME] to comply with the full statutory consultation procedures. In particular, [NAME] cannot nominate a contractor in response to the Stage 1 notice which the Act would require the authority to serve. The alternative would be for [NAME] to purchase gas and electricity annually at a fixed price. This would not require consultation as the agreement would be for a period of less than 12 months.

18. The tribunal have considered the objections raised by the [NAME]. [NAME] has responded to these. It is apparent that some [NAME] have been unclear about what is proposed. [NAME] has sought to provide clarification. Others suggest that the sums charged to their blocks have been unreasonably high. [NAME] has sought to address their concerns.

19. The only issue which this tribunal has been required to determine is whether or not it is reasonable to dispense with the statutory consultation requirements. The grant of dispensation does not affect a [NAME]'s right to challenge the gas and electricity charges sought through their service charges. A [NAME] who considers that the charges have not reasonably been incurred may still make an [NAME] to the Tribunal for a determination under section 27A of the Act.

20. No [NAME] has established that that they will suffer any prejudice as a result of [NAME] not complying with the statutory consultation

7 procedures. In the circumstances, it is appropriate to grant dispensation without any conditions. Notification of this Decision 21. The tribunal will send a copy of its decision to the [NAME] specified in paragraph 6 above. 22. [NAME] shall, by 7 August, send a copy of the tribunal’s decision to all [NAME], by email, hand delivery by first class post.

23. Further, [NAME] shall, by 7 August, place a copy of the tribunal’s decision on its website and shall maintain it there for at least 3 months, with a sufficiently prominent link on its home page. Judge Robert Latham 30 July 2020

Rights of appeal By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written [NAME] for permission must be made by e-mail to the First-tier Tribunal at the regional office which has been dealing with the case. The [NAME] for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the [NAME]. If the [NAME] is not made within the 28 day time limit, such [NAME] must include a request for an extension of time and the reason for not complying with the 28 day time limit; the tribunal will then look at such reason(s) and decide whether to allow the [NAME] for permission to appeal to proceed, despite not being within the time limit. The [NAME] for permission to appeal must identify the decision of the tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal and state the result the party [NAME] the [NAME] is seeking. If the tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal (Lands Chamber).