Increase Electricity Rates caused by Freeholder unpaid Past Bills

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    Increase Electricity Rates caused by Freeholder unpaid Past Bills

    Our current Building Freeholder and Managing Agent took over from previous Freeholder and Managing Agent on 1st April 2019.

    As we were explained by current Freeholder and Managing Agent seems that previous Freeholder and Managing Agent hadn’t paid for communal areas electricity bills (including central heating) since 2016 (over 100K of unpaid Historic electrical bill). Up to our understanding this Historic Bill hasn’t been paid back to electricity company yet by the Freeholder or Managing Agents.
    Freeholder and Managing Agent have told leaseholders, 3 months ago, they were reviewing the situation with their legal department on how to proceed with this Historic bill. Freeholder and Managing Agent haven’t given a date to leaseholder on when they clarify/fix this outstanding bills.

    Problem leaseholders have is that due to Freeholder and Managing Agent unpaid electric bills the electricity company has taken the site out of contract meaning Higher kWh rates to be paid this winter.

    We don’t think this Electricity Higher kWh rates created by failure to pay electricity bills by the Freeholder and Managing Agent should be passed then to leaseholder as increased Service changes.

    Leaseholders are not in control on when Freeholder and Managing Agent will pay the Historic Electricity bills they owe to Electricity company and doesn’t seem they are in a hurry to pay that debt back.
    We think that Freeholder and Managing Agent will pass this year increased Higher kWh rates electricity bills (caused by Freeholder and Managing Agent unpaid bills) to the leaseholders on the Service Charges.

    What can leaseholders do to prevent being overcharged (Higher KWh rates) by Freeholder and Managing Agent because of their unpaid Electrical bills?

    Have the leaseholders been charged for the past electricity charges? If the previous freeholder has collected monies and not paid the electricity supplier, it should have passed over the funds to the new freeholder.

    Your new freeholder should be able to enter into a new contract with an electricity supplier. It should not be affected by a previous contract,


      Hang on a second - are you seriously suggesting the the COMMUNAL areas have generated an Electric Bill of £100,000 in 3 years (2016 to April 2019)

      Is your COMMUNITY known as Birmingham and you're paying for the street lights for the whole City.

      Just read your other post some months ago and it appears the amount is £84k not £100k - not a huge issue in the scheme of things I guess.

      It also appears there are something like 90 residential units altogether?

      Still seems excessively high for what would probably be around 50 light bulbs and a bit of power for hoovering.
      My views are my own - you may not agree with them. I tend say things as I see them and I don't do "political correctness". Just because we may not agree you can still buy me a pint lol


        Thanks eagle2 for your prompt reply.

        Leaseholders have been charged yearly with electricity charges but seems Freeholder/Managing Agent had paid the Bills to electricity company.

        Below Managing agent understanding on the topic (from beginning of this month):

        Large number of electricity invoices were unpaid by Previous Agent.
        Invoice party was set up incorrectly by Previous Agent or their broker, in the name of Previous Agent rather than correctly in name of Previous Freeholder.
        Large sum of electricity arrears at handover to New Agent, and limited funds handed over.
        New Agent unable to pay electricity bills for further 12 months (until 16th March 2020) when Electricity Company correctly invoiced with correct invoice party c/o Previous Freeholder.
        Electricity Company refused to enter into contract unless arrears cleared, which was not possible with the funds at hand.
        Previous Agent should have corrected the invoice party during their management. Electricity Company then could have resolved much quicker, in a reasonable time rather than allow the arrears to build. But 12 months to sort, with arrears building up on

        Which tools do freeholders have not be passed on consequences of being out of electricity contract (Higher KWh rates electricity charges) because Freeholders and/or Managing Agents haven’t paid the bills we were charged for?


          Thanks landlord-man for your reply,

          Site Underfloor Heating System runs with Electricity and is Managed by Freeholder/Managing Agent.
          Electricity is the is the biggest Service Charge expence.


            It is not making much sense at the moment. If there were limited funds handed over, does that mean that there are substantial arrears owing by leaseholders?

            You should still be able to enter into a contract with a different electricity supplier and avoid the additional charges,


              Thanks for your active support,

              New Freeholder and Managing Agent found out that Electrical Bills since 2016 haven’t been paid by Previous Freeholder a year into having took over the Site.

              This was also News for leaseholders who have been charged Yearly for electricity (around 40K a year for electricity expense) via Annual Service. Seems collected Annual Service charge money wasn’t used by Previous Freeholder/Managing Agent to pay the actual electricity bills.

              Previous Freeholder/Managing Agent and New Freeholder/Managing Agent need to understand between them why these bills weren't paid, why they weren't communicated to New Freeholder when taking over, and who owns that debt (Bills are well passed 18month Act 20B(1)(2) rule).

              Thanks for pointing out that New Freeholder/Managing Agent should still be able to enter into a contract with a different electricity supplier to avoid higher KWh rates in current consumption being passed to leaseholders.


                I would agree with eagle2 that the freeholder (via their managing agents) should probably be able to get a contract on more normal tariffs with another supplier (if the current supplier is trying to charge higher rates to recoup bills that haven't been paid).

                Unless the current freeholder can show that past charges for electricity haven't already been paid by leaseholders, they have a responsibility to make sure that leaseholders aren't financially disadvantaged by this, regardless of what has happened. If leaseholders haven't already been charged for all of the electricity, only costs incurred within the last 18 months can legally be passed on to the leaseholders, unless they were notified of the amount that would later need to be paid within 18 months of the freeholder/managaing agent receiving invoices.

                Who pays any outstanding invoices (previous freeholder or current one) is for them to sort out between them. If there is any suggestion that leaseholders are paying twice for electricity, or any other costs, as a result f a failure of the freeholder or their managing agents (past or present) you will have grounds to contest the excess costs.


                  The previous freeholder should have provided a statement of the service charge funds and details of all monies due to the freeholder and payable by the freeholder.

                  If all monies have been passed over to the new freeholder and the new freeholder is entitled to collect debts due from the leaseholders, the new freeholder is responsible for paying any unpaid debts including the amount payable to the electricity supplier.

                  You will need to ask why the previous freeholder did not pay the bills, but the obvious reply will be that it did not hold sufficient funds at the time.

                  The 18 month rule does not appear to apply, you appear to have been informed of the charges and you appear to have been billed for them already. The rule only applies to charges of which you are unaware and which were incurred 18 months prior to when the freeholder intends to charge you.


                    Thanks Macromia and eagle2 for your replies.

                    To clarify,
                    What’s seems had happened is that previous Freeholder collected requested service money from Leaseholders (including for electricity expenses: 40K a year) but didn’t pay for the actual electricity bills (not one bill paid since 2016 to 2019) by the looks of it. It’s unknown to leaseholders what they did with the money.


                      The previous freeholder/agent should explain what has happened to the monies and why they have not paid the electricity bills. The previous service charge accounts prepared by them should provide clues. There should be some large balances appearing within those accounts eg debtors owing by leaseholders, cash balances held and creditors owing to the electricity supplier.

                      You are not in a position to accuse the freeholder/agent of theft at this stage but the service charge monies must be ringfenced and used only for service charge expenditure.


                        Agreed eagle2 with your comments,

                        Leaseholders don't know what did happened with previous years paid service charges. It’s not to us to accuse of having done any wrongdoing.

                        Leaseholders view is that it’s up to Current Freeholder/Managing Agent and Previous Freeholder/Managing Agent to understand and solve the situation.

                        Thanks for your support.


                          Based on what you have said, this is definitely something that the current freeholder needs to sort out with the previous freeholder and the electricity supplier.

                          I would say that the new freeholder has a responsibility to ensure that the block is not being charged a high rate that is intended to allow the electricity company to recoup electricity costs that the leaseholders have already been paid. Unfortunately, if the freeholders do nothing about this, the onus will likely be on the leaseholders to prove that (a) they have already paid all past electricity costs and (b) that the current rates are higher than they should be because the electricity company is recouping costs a debt that the leaseholders have already paid, if they want to challenge the costs.


                            Your other thread indicates that there is a large deficit for 2020 and the major part of that deficit relates to electricity. That suggests that the electricity bills exceed what has been charged previously, so you do need a full explanation from the current freeholder.


                              Thanks Macromia,
                              Leaseholders have annual Audit accounts that Previous Freeholder/Managing Agent sent to Leaseholders where it can be seen money collected and expended for each commodity (including electricity) and of course the prove we have paid all requested Yearly service charges.

                              2020 Large deficit corresponds to New Freeholder/ Managing agent receiving from Electricity Company “Historic Electricity Invoices” (from 2016 to 2019) when transferring Electricity Name from Previous Freeholder/Managing Agent to New Freeholder/Managing agent.
                              We have asked for Bills to be shared with us and they correspond each month bill (since 2016) from to the only 2x common electric meters on the site (i.e. they correspond to all common electricity usage).


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