Supply of electricity to commercial premises: who is responsible for the bill if the tenant leaves unexpectedly?

Landlords of commercial properties are increasingly finding themselves stuck with utility bills after the unscheduled departure of their tenants. 

The contract for supplying electricity (and gas) is usually between the supplier and the occupier of the premises for the duration of their lease, rather than the owner.  If there is no express contract, contracts to supply electricity will usually fall under a ‘deemed contract’ regime where no contractual terms have been officially agreed between the parties.

The difficulty arises when the tenant leaves the property before the end of the lease and the utility provider seeks to lumber the owner with any outstanding bills or disconnection charges under the deemed contract regime because of the lack of any formal agreement with the tenant.

Suppliers will inevitably argue that if a tenant leaves before their lease is up, then the landlord has to shoulder responsibility for electricity used but, as there is limited case law on deemed contract relationships, both parties would need to consider whether escalating the situation is in anyone’s best interest.

However, providing there is no evidence to show that the landlord entered into any form of agreement or correspondence with the supplier that implied a substitute contract, the landlord can claim that the deemed contract regime does not apply and that the supplier must pursue the tenant for any non-payment of outstanding charges.  Showing that the tenant paid for electricity in the past may also be an effective way of demonstrating that there was an implied contract in place with the tenant.  If the owner can demonstrate that the tenant was in occupation during the period in question, for example by providing a copy of the lease for that period, the supplier will struggle to require the owner to pay up.

In order to avoid this situation arising in the first place, there are a few simple steps that landlords and their managing agents can take:

• Check for properties that become unexpectedly vacant (piles of post etc)
• Inform all the utility providers
• Agree the basis of future supply if relevant (it may be required for security systems for instance).  The terms of the deemed contract may not be the most advantageous under the changed usage and it may be a good time to change providers
• If no supply is needed, make sure that this made clear in writing. The inconvenience of reconnecting a disconnected supply is often preferable to an argument over who is responsible for paying for what or to the risk of trespassers breaking in to use the supply.

April 2011