Midlands-based property managing agents CPBigwood, with offices in Birmingham, Stratford-upon-Avon and Henley-in-Arden, have welcomed a move to safeguard apartment owners from having their power cut off.
A deal has been agreed between the Association of Residential Managing Agents (ARMA) and the big six energy companies to protect leaseholders from disconnections to the communal areas of their property.
The initiative has been driven by ARMA in response to a number of instances highlighted by members.
No power in the communal areas means no fire alarms, no emergency lighting, no lifts, no water supplies and no sewage pumping. On one occasion, a local authority had to step in and pay a landlord’s electricity bill to prevent apartment owners being made homeless because of the threat of disconnection.
The new protocol has been agreed with the Energy Retail Association (ERA) which represents the major suppliers.
Brett Williams, partner in the residential service charge department of CPBigwood, a director and immediate past chairman of ARMA, said: “This is a really significant agreement.
“Communal areas are the lifeblood to a block of apartments providing lifts, lighting, water and fire alarms. Although rare, power disconnections to these areas can have as serious an impact as they would for individual apartments and houses.
“This new protocol should make energy suppliers think about the adverse affects on leaseholders before resorting to disconnections and make it absolutely a last resort.”
In a block of leasehold apartments it is the landlord or residents management company (RMC) that is responsible for ensuring energy bills for the communal areas are paid. Leaseholders pay service charges to cover the cost of services to communal areas including energy bills. Non or late payment by leaseholders can easily disrupt the cash flow of the service charge account that pays these bills. This effectively puts the landlord or RMC in debt to the energy company who will then take the disconnection route if payment is not met.
Mr Williams said: “Part of the problem is that the communal areas of blocks of apartments are defined by Ofgem, the energy regulator, as commercial premises. This means they are not covered by the same safety net that protects the residents of individual apartments within the buildings who are defined as domestic customers.
“Energy companies can disconnect the power to the communal areas therefore without having to consider the effect it might have on residents.
“We had a case in Willenhall where, for no reason, the electricity company didn’t send the bill for the hallway lighting and heating, security gate, door entry system, external lighting, smoke alarms, communal TV system and lift to us but to the block itself. Nobody re-directed it on.
“Before the property manager had even noticed that the bill was late, they had disconnected the supply without writing to anyone about it! The block of apartments concerned was operated by an RMC which ran a very tight ship and had little cash available.
“The electricity provider wouldn’t reconnect the supply until the bill was paid in full, the disconnection and reconnection admin costs were settled in full and a deposit made against future charges. This was just before Christmas and you can imagine that it didn’t go down too well with the residents who wanted to have a secure, heated and lit development … and to watch their Christmas telly!
“We paid up, ensured the electricity was reconnected and spent six months arguing to get all of the admin costs back.”
Mr Williams went on: “The new ARMA/ERA protocol prompts energy suppliers to make every effort to contact the landlord or managing agent before resorting to disconnection of power to communal areas. It also encourages them to consider the impact this might have on occupants. Generally it is meant as a guide to help avoid disconnections by addressing the issue earlier in the debt-collection pathway.
“The agreement also establishes the role and responsibilities of ARMA managing agents. This includes making the supplier aware of the potentially catastrophic effects of disconnecting the power to the communal areas and prioritising invoices for utilities before others if service charge funds are limited.”