Heating contracts need to be properly scrutinised, lawyers caution
Landlords warned over rush for district heating
Social landlords rushing to install district heating systems are being warned they risk exposing themselves to massive liabilities.
Landlords are increasingly installing the systems, which supply heating to multiple buildings instead of having a boiler in every home, as part of a drive to spend millions of pounds of energy-efficiency subsidy before December.
However, lawyers warn that landlords which sign up to district heating contracts with energy supply companies without consulting properly risk tenants challenging them if they have to pay charges for heating.
If consultations are not carried out, tenants’ heating bills could be capped at a rate of £100 a year under the Landlords and Tenant Act 1985, meaning landlords or energy companies would be left stumping up the rest.
It is thought that in at least two cases tenants have successfully challenged their landlords - although the details of these cases have not been made public.
Simon Bagg, a senior associate at law firm Lewis Silkin, said that if landlords aren’t following the correct procedures the contracts could be ‘a ticking time bomb’.
Law firm Trowers & Hamlins has assigned three lawyers to scrutinise landlords’ district heating contracts. While there are no official figures on the number of district and communal heating systems installed so far, or how many are planned, the Combined Heat and Power Association has identified 60 residential and commercial projects under construction, which will supply heat to 45,000 homes (see box: What’s behind the district heating boom?).
The Department of Energy and Climate Change’s heat strategy estimates that heat networks supply 172,000 domestic buildings - the majority of which are social housing and tower blocks. It predicts such
systems could meet about 50 per cent of all England’s heat demand.
Ian Manders, deputy director at the CHPA, said: ‘There has been a rush of social landlords signing up to district heating schemes so they could be included under the community energy saving programme.’
Rhianna Wilsher, a solicitor at Trowers & Hamlins, said tenant consultations were tricky because the concession agreements signed with energy companies to supply heat and maintain the equipment are often lengthy and the consultations apply even for new build homes with no residents.
‘The Landlord and Tenant Act was not drafted with long-term district heating arrangements in mind and it is important that a landlord considers section 20 consultation requirements at the earliest opportunity,’ she said. ‘Appointing heat suppliers on long-term arrangements for new build schemes may be complicated if there are no tenants in occupation at the time that the agreement is procured and signed.
What’s behind the district heating boom?
- £40 billion size of the Treasury’s infrastructure guarantee fund for which district heating can apply
- £10 million Department of Energy and Climate Change competition for social landlords installing low-carbon heating systems. The renewable heat incentive will provide more subsidies, but the level is yet to be set
- 60 residential district heating projects under construction, according to the Combined Heat and Power Association
- £5.5 billion predicted spend on measures, including district heating, by energy firms to meet the carbon emission reduction target