energy contracts
📖 What is energy contracts? Meaning and definition
In the context of UK tenancy law, an energy contract refers to the agreement a landlord or property management company has with an energy supplier to provide utilities to a property. These contracts typically have a fixed duration, such as 12 months, and specify the price per unit of energy, for example, pence per kilowatt-hour (p kw/hr).
Landlords often need to enter into or renew these contracts to ensure continuous energy supply for their properties. When an existing energy contract is due to expire, the cost of renewal can significantly increase, potentially placing financial pressure on the property's occupants through higher service charges.
For long-term agreements, especially those lasting longer than 12 months, landlords may need to follow specific consultation requirements under Section 20 of the Landlord and Tenant Act 1985 and The Service Charges (Consultation Requirements) (England) Regulations 2003. If these requirements are not met, or if there's an urgent need to secure a new contract to avoid substantial price increases, a landlord might apply to the First-tier Tribunal for a 'dispensation' to bypass these consultation rules.
This dispensation allows the landlord to enter into a new, often longer-term, energy contract without going through the usual consultation process with tenants, particularly when the aim is to secure a more favourable rate and prevent significant financial burden from a short-term, expensive renewal.
📋 Requirements
- The contract relates to the supply of energy (electricity or gas) for a property.
- It typically has a defined duration, such as 12 months.
- The contract specifies the cost of energy, e.g., per kilowatt-hour.
- For agreements lasting longer than 12 months, consultation requirements under Section 20 of the Landlord and Tenant Act 1985 may apply.
- A landlord may seek dispensation from consultation requirements to enter into a long-term contract.
📝 Procedure
- An existing energy contract approaches its expiry date.
- The landlord or applicant identifies a potential significant increase in cost if the contract is renewed on a short-term basis (e.g., 12 months).
- The landlord considers entering into a longer-term energy agreement.
- If the agreement is longer than 12 months, the landlord may apply to the First-tier Tribunal for dispensation from consultation requirements.
- The Tribunal reviews the application and may grant dispensation to allow the landlord to proceed with the long-term contract.
💡 Examples
- A landlord applied for dispensation to enter into an energy contract lasting longer than 12 months for a property in Southport, as the current contract was expiring and costs were set to quadruple.
- The First-tier Tribunal granted permission for a landlord to secure a long-term energy agreement for a property in Stockport to avoid a significant increase from 20p kw/hr to 89p kw/hr.
- An applicant sought to bypass consultation requirements to enter a new energy contract for a property in Heaton Mersey, noting the current arrangement was due to expire in October 2022.
- A property management company needed to renew its energy contract, but faced a substantial price hike if they opted for another 12-month term, prompting them to seek a longer agreement.
📚 Legal basis
- Landlord and Tenant Act 1985
- The Service Charges (Consultation Requirements) (England) Regulations 2003
❓ Frequently asked questions
What happens if a landlord's energy contract expires?
When a landlord's energy contract expires, they typically need to renew it or enter into a new agreement. Without a new contract, the property's energy supply could be affected, or the cost of energy might increase significantly, especially if renewed on a short-term basis.
Why would a landlord want a 'long-term' energy contract?
A landlord might want a long-term energy contract to secure a more stable and potentially lower price for energy over an extended period. This can help avoid sharp price increases that might occur with shorter, renewing contracts, ultimately benefiting tenants by stabilising service charges.
What are 'consultation requirements' in relation to energy contracts?
Consultation requirements are rules under the Landlord and Tenant Act 1985 and related regulations that require landlords to consult with tenants before entering into certain long-term agreements, including some energy contracts, especially if the cost will be passed on through service charges.
What does 'dispensation' mean for an energy contract?
Dispensation is a legal permission granted by the First-tier Tribunal that allows a landlord to bypass the usual consultation requirements. This is often sought when there's an urgent need to secure a new energy contract to prevent significant cost increases, and following the full consultation process would cause undue delay or financial harm.
How do energy contract costs affect tenants?
The costs from a landlord's energy contract are often passed on to tenants through service charges. If the energy contract costs increase significantly, tenants may face higher service charges, placing financial pressure on them.
Can tenants challenge a landlord's energy contract decisions?
Tenants may have grounds to challenge decisions regarding service charges, including those related to energy contracts, if the landlord has not followed the correct legal procedures, such as consultation requirements. For specific advice, it is recommended to consult a qualified solicitor.