10/02/2009

Commercial Property e-brief – Deemed contracts for the supply of electricity – another problem for landlords!

Paragraph 3 of Schedule 6 of the Utilities Act 2000 states that:

“Where an electricity supplier supplies electricity to any premises otherwise than in pursuance of a contract, the supplier shall be deemed to have contracted with the occupier (or the owner if the premises are unoccupied) for the supply of electricity as from the time when he began so to supply electricity”

The effect of this is to allow electricity suppliers to charge landlords for electricity supplied to premises even where there is no contract with the landlord.

Where a lease is still in place the landlord is not in occupation. This is so even if the tenant has vacated the premises or is in administration. Therefore the landlord cannot be charged under this provision.

However, where a tenant company goes in to liquidation and the liquidator disclaims the lease, the supplier will be able to argue that if electricity is still being supplied to the premises then there is a deemed contract with the landlord, as the property is unoccupied.

The position is less clear where a tenant company has been dissolved and the lease has vested in the Crown.  There is no case law on this. With rates, the rating authorities accept that the landlord cannot be charged rates in this situation.  However as the supplier will not be able to recover from the Crown it is probable that they will look to the landlord.  In those cases if the landlord does not require an electricity supply at the premises, consideration should be given to making arrangements for the supply to be terminated so that there can be no liability for the landlords.

If the landlord does need a supply e.g. to show prospective tenants around, then it may be better to enter into a contract with it’s normal supplier on more favourable terms that the tenant may have had.

Any claims for a deemed supply need to be looked at carefully.  There is no liability for the landlord prior to the lease being disclaimed or the tenant company being dissolved and so care should be taken to ensure that any bills that are paid do not include any prior charges which remain the responsibility of the former tenant.

If you would like further information on this topic please contact a member of our commercial litigation team.