Landlords Beware: Are you paying more than you should for utility supplies to vacant properties?

Throughout the pandemic, thousands of tenants have chosen to delay payments of their rent. Some through choice and others because they are simply unable to do so.  This is adversely effecting cash flow for landlords, who still have outgoings to pay.

As tenants vacate premises through choice, or being forced due to insolvency, or forfeiture, the predicament of landlords will become worse as they face the prospect of void properties.

One of the many considerations for the landlord with a void property is the cost of the utilities being supplied to the vacant premises. Landlord should be aware that, if there is no contract for supply in place, gas and electricity will be supplied by way of a deemed contract.

In the context of electricity, a deemed contract is implied by the Electricity 1989, which states that “where electricity is supplied otherwise than in pursuance of a contract, the supplier shall be deemed to have contacted with the occupier (or the owner if the premises are unoccupied) for the supply of electricity.” There are similar provisions in 

Therefore, where a property is vacant a deemed contract will be implied between the supplier and the landlord.

Where a tenant has simply abandoned a property, a landlord may try to argue that the lease remains in place. However, as can be seen from above, the legislation imposes a liability on the occupier of the premises and if the premises are unoccupied, the owner. It does not on the face of it impose a liability upon a tenant who no longer occupies a premises, irrespective of whether the lease remains in place.

The deemed contracts are enforceable by energy suppliers in many cases. Even though the premises are vacant, it is still likely that some electricity will be being consumed, such as by the alarm system or the security system. The issue is that such charges on a deemed contract basis are likely to be higher than on a fixed term contract basis.There will also be standing charges and other charges which could potentially be substantial. These may include a capacity charge, which is a fee to ensure that there is enough electricity in the system. Such a charge may be based upon historic consumption and not reflect the current requirements.

As such, as soon as a property becomes vacant or looks like it is becoming vacant, landlords are advised to find out who is supplying the utilities to the property and contact them as soon as possible. It may then be possible to agree a fixed term contract with the supplier on significantly lower rates than deemed contract rates. The landlord may also wish to reduce the capacity available to the property helping to reduce the overall cost. 

The key is to put in place a formal arrangement with the utility suppliers as soon as possible. The longer it takes to put in place an agreement with the supplier, the higher the overall cost is likely to be under the deemed supply contracts.