Occupied in fact, unoccupied in law? High Court draws the line on deemed energy supply contracts and landlord liability in footing the bill

The High Court has clarified how the Electricity Act 1989 applies where electricity is supplied to a building made up of multiple, separately occupied units. The decision in SmartestEnergy Business Ltd v Odeon Arcade Ltd ('SmartestEnergy') provides useful guidance on when an electricity supplier can pursue a landlord for unpaid charges under a deemed contract.

What is a deemed contract?

A deemed energy supply contract exists when electricity is supplied without an express contract between the supplier and the customer for example, when someone moves into a property. In broad terms, the legislation can treat the supplier as having a contract with the occupier of the premises, or with the owner if the premises are unoccupied.

What was the issue in SmartestEnergy?

In this case, an energy supplier, SmartestEnergy, sought to recover through insolvency proceedings unpaid electricity charges of £106,915.25 from the landlord of three retail units contained in a building. Although each unit was let to a tenant, they were served by a single meter. The supplier argued that, because there was no single occupier of the premises as a whole, the premises should be treated as "unoccupied" under the Electricity Act 1989 and the landlord was therefore liable under a deemed contract.

The court rejected that approach in interpreting how the Electricity Act 1989 applies in these circumstances. It held that the word "unoccupied" should be given its ordinary meaning. Where individual units within a building are occupied by tenants, the premises cannot realistically be described as unoccupied simply because they are not occupied as a single whole.

As a result, the landlord was not liable under a deemed contract, and the winding-up petition was dismissed.

Implications for energy suppliers

The decision narrows the circumstances in which suppliers can rely on deemed contracts when seeking to recover unpaid charges in multi-let properties. In particular, suppliers cannot assume that a landlord will be liable simply because a property is served by a single meter if the individual units are occupied.

From a practical perspective, this underlines the importance of ensuring that appropriate contractual arrangements are in place with the correct parties, rather than relying on deemed contract provisions as a fallback. It also limits the use of insolvency proceedings as a debt recovery strategy where liability under a deemed contract is uncertain.