Section 20 Dispensation, Consultation Stage 2, Notice of Landlord's Proposal
NOTE: Stage 2 of our consultation has now ended. Please see Stage 3 of our consulation here.
On the 18th Feb 2019 we wrote to all Incommunities and Sadeh Lok customers paying a service charge for shared electricity supplies.
We are now writing to those same customers about the shared electricity supply for which you pay a service charge. A shared electricity supply includes, for example, power to lifts, indoor or outdoor lighting, shared heating & facilities, alarms and door entry systems.
The first letter was to give these customers notice that Incommunities Group Limited is following a legal process, known as a ‘Section 20 Dispensation’, which would allow us to enter into a longer-term, better value supply agreement with an electricity company. This gave the customers the opportunity to submit any comment they may have had about this notice.
We are writing to the same customers as part of a second stage of consultation with the formal ‘Notice of Landlord’s Proposal’.
The Stage 2 Notice lets customers know our intended procurement route for shared electricity supplies and the partner organisations involved and gives them a further opportunity to submit any comments they may have. Due to the value of future electricity contracts, Incommunities customers will not be invited to propose their own preferred supplier.
This process does not include or affect personal domestic electricity supplies.
If you receive a Section 20 Notice letter, you do not need to take any further action and you are not required to respond.
If you have any specific queries that are not covered in the Frequently asked questions Section 20, please call our Customer Contact Centre on 01274 257777.
- If you have any comments about this proposal they should be submitted in writing. Send your comments in an envelope, no stamp required, using this address: FREEPOST Incommunities
- The period in which we will receive comments is between 23rd April 2019 and 24th May 2019 ; any comments received after 4.30pm on 24th May 2019 will not be taken into account.
Following this second stage of consultation, customers receiving Section 20 letters from us will receive formal notification from HM Courts & Tribunals Service, letting them know that Incommunities is applying for Section 20 Dispensation. Customers receiving a Tribunal letter do not need to respond to it.
If you have any specific queries that are not covered in the Frequently asked questions Section 20, please call our Customer Services Team on 01274 257777, who will be able to deal with your enquiry.
Frequently asked questions Section 20 click to download
A feedback form for your comments can be found below on this page.
Statutory Notice of Landlord’s Proposal for Procuring a Long Term Electricity Supply Contract
In accordance with Section 20 of the Landlord and Tenant Act 1985 (as amended by Section 151 of the Commonhold and Leasehold Reform Act 2002) under Schedule 2 of the Service Charges (Consultation Requirements) (England) Regulations 2003.
1. It is the intention of Incommunities Group Ltd (including Sadeh Lok Ltd) to enter into a long-term agreement in respect of which we are required to consult tenants and leaseholders (see Note 1 below).
2. The goods & services to be provided under the agreement are the purchase and supply of electricity for landlord supplies, including communal areas.
3. We consider it necessary to enter into the agreement because we have a duty to ensure ‘Landlord supplies’ of electricity are available to power lighting and equipment, payable through a service charge. The current electricity supply contract ends on 30th September 2019.
4. We are intending to procure electricity through a six month fixed contract from October 2019 – March 2020, followed by a three year ‘Flexible collective’ contract from April 2020 – May 2023 (which is the subject of this consultation).
5. There are two approaches we could use to procure electricity supplies:
- A fixed contract, where the total volume of electricity required is purchased on a single day for a specified period;
- A flexible collective contract, where electricity is purchased in different ‘lots’ in advance of a contract period.
6. We believe a flexible collective contract offers a best-value approach to the purchase of electricity supplies. Signing up to a flexible collective contract means that the amount of electricity we need will be combined with that of other organisations. This bulk purchasing approach means we can take advantage of lower supplier margins (i.e. the amount the energy supplier charges for their services).
7. The flexible collective contract we are proposing to enter into works as follows:
- Electricity is bought in regular amounts across a twelve month period in advance of the usage period. We will buy the electricity needed for landlord supplies from April 2020 in 2019. This enables purchases to be timed to avoid unusual spikes in market prices, spreading the risk of price fluctuations. (see figure 1)
- This approach doesn’t guarantee that all electricity will be purchased at the lowest possible price available during a particular period, but overall this approach should result in procurement at below average prices.
- Once our total supply of electricity is purchased (usually by the January prior to the April start date) we will then know how much the electricity supply will cost and will be able to calculate your services charges.
Figure 1 above: Flexible Procurement in Practice
8. Because electricity would be purchased in advance in a flexible collective contract, it would only be available for a minimum period of three years. This also means that if we want to start a flexible collective contract from April 2020 we will need to sign a contract in autumn 2019 to enable us to be included in the advanced purchasing collective.
Parties to the proposed agreement
9. Energy procurement is a specialist area and Incommunities Group does not have the technical expertise to procure a contract that is legally compliant and provides best value for the organisation and our customers. We have therefore partnered with an organisation that specialises in energy procurement and who will act as a third party intermediary:
Inprova Energy, 2 Olympic Way, Woolston Grange Avenue, Warrington, WA2 0YL
There is no connection (apart from the proposed agreement) between Incommunities Group and Inprova Energy or Procurement for Housing.
12. An energy supplier - to be identified in 2019 from the Procurement for Housing / Inprova Energy framework - will also be party to the proposed agreement for electricity supply from April 2020 onwards. As the framework has not yet been completed we do not yet know from which supplier we will be procuring electricity for this three year period.
Costs to tenants and leaseholders
13. The costs of procuring and delivering electricity for landlord supplies are recouped through services charges. The procurement approach we have outlined above is intended to provide the best value for Incommunities Group customers. However, due to the flexible procurement methodology and the nature of the energy markets it is not possible to provide set or guaranteed prices as part of the consultation.
Seeking of dispensation from Section 20 consultation requirements
14. Due to the factors outlined above we will be applying to the First Tier Tribunal (Property Chamber) for dispensation from the following consultation requirements set out in Schedule 2 of the Service Charges (Consultation Requirements) (England) Regulations 2003:
- the requirement to state the name and address of every party to the proposed agreement (section 4.(2)(a))
- the requirement to state any connection (apart from the proposed agreement) between the landlord and any other party (section 4.(2)(b)
- the requirement to estimate the relevant contribution to be incurred by each tenant under the proposed agreement (section 4.(4))
15. It is our intention to apply to the First Tier Tribunal (Property Chamber) after the conclusion of the consultation period initiated by this notice. By doing so, we will be able to address any concerns or queries raised by tenants or leaseholders in response to this consultation.
16. If we do not succeed in gaining this dispensation, this will mean we can only procure contracts on a 12-month, fixed price basis. We do not believe this will provide best value for the organisation or our customers.
How to respond to this consultation
17. We invite you to make written observations in relation to the proposed agreement by sending them to:
Observations must be received within the consultation period of 30 days. This runs until 24th May 2019. Responses received after 4.30pm on 24th May 2019 will not be taken into account.
18. Some Section 20 Consultations allow tenants and leaseholders to propose a person or supplier from who we should try to obtain an estimate for the works or services. In this instance, as the proposed agreement requires public notice as part of European Union legislation, you are not able to nominate a person or supplier for this contract.
1) Section 20 of the Landlord and Tenant Act 1985 (as amended) (‘the 1985 Act’) provides that a landlord (as defined by section 30 of the 1985 Act) must consult tenants/leaseholders who are required under the terms of their tenancies/leases to contribute (by payment of service charges) to costs incurred under a qualifying long term agreement, where the contribution of any one tenant/leaseholder exceeds £100 in any accounting period. ‘Qualifying long term agreement’ is defined by section 20ZA of the 1985 Act.
2) Where a notice specifies a place and hours for inspection:
(a) the place and hours so specified must be reasonable, and
(b) a description of the relevant matters must be available for inspection, free of charge, at that place and during those hours.
If facilities to enable copies to be taken are not made available at the times at which the description may be inspected, the landlord shall provide to any tenant, on request and free of charge, a copy of the description.
3) The landlord has a duty to have regard to written observations made within the consultation period by any tenant, leaseholder or recognised tenants’ association. ‘Recognised tenants’ association’ is defined by section 29 of the 1985 Act.
4) There is no right of nomination of alternative contractors where public notice is required.
Summary Response to Questions raised in Stage 1 Consultation
The first section 20 consultation period ran from 18th February 2019 to 22nd March 2019.
During this period we received three written enquiries, two of which were regarding property repairs and not relevant to the consultation.
The third query was regarding a concern around having to pay a new service charge. This was a misunderstanding, as the section 20 process only relates to existing service charges. The section 20 consultation process does not include any new service charge provision.
If you have any comments please complete the form below.