By Jodie Fraser, JMJ Asset Management, and Joey Kolirin, Full Power Utilities
Within the UK property sector, block and estate management is complex, but many people outside the industry do not fully understand it. The same can be said for energy procurement and supply. When these two areas come together, the lack of alignment becomes clear. This is where many recurring issues begin
Despite working with major suppliers such as SSE, EDF Energy and E.ON Next, Managing agents frequently encounter challenges. These are not caused by poor intent, but by a lack of understanding of how leasehold buildings operate.
These issues often appear as incorrect billing, misclassified supplies and delays in account setup. Contract structures also fail to reflect how multi-occupied buildings operate.
It requires a more considered, specialist approach, something that those working closely within the sector, including Full Power Utilities, have spent years developing through direct experience with managing agents and landlord supply portfolios.
Expert insight from Joey Kolirin
For example, most energy suppliers will run a ‘credit check’ on each ‘entity’ when they consider taking on a supply contract. When dormant, non-trading entities are being credit checked, they often have no credit score therefore, the suppliers in question will simply ‘decline’ the business meaning that the pool of options becomes very limited to the leaseholders. Furthermore, as most managing agents pay by non-direct-debit, the people within the credit departments who have already wrongly decided that they won’t receive their money due to ‘poor/no credit’ then state that in paying non direct debit it will be impossible to recover monies owed to them.
This can result in higher costs than a market average price and it can mean that lots of very credible options are not possible (in this sector).
A sector that doesn’t fit the standard model
Energy suppliers are generally structured around clearly defined categories such as domestic, commercial or industrial supply.
Block management sits between these classifications but does not align with any of them. A single residential development can include multiple landlord supplies. These cover communal lighting, lifts and plant equipment.
However, the complexity goes beyond the physical infrastructure. The legal and operational structure behind these supplies is often what causes the greatest confusion. Responsibility may sit with a Resident Management Company (RMC), a Right to Manage Company (RTM), a freeholder, or a managing agent acting on behalf of one or more of these parties. Each structure carries its own obligations, particularly in relation to service charge recovery, compliance and financial accountability.
Without a clear understanding of these dynamics from the outset, Suppliers often set up energy accounts incorrectly. These issues can continue for years if no one identifies them early. This is something specialist consultants see regularly when reviewing portfolios that have been set up using standard commercial frameworks rather than a leasehold-focused approach.
Why accuracy in energy procurement matters
There is a common perception that energy procurement for block management is primarily about securing the most competitive price. While cost efficiency is important, it is only one part of the picture. Accuracy is what ultimately protects both the managing agent and the leaseholders.
Ensuring that meter types are correctly identified, supplies are properly classified, VAT is applied appropriately, and contracts are structured in line with lease obligations is essential. Errors in any of these areas can lead to overpayment, difficulties in recovering costs through the service charge, and, in some cases, disputes with residents who quite rightly expect transparency and fairness.
From a managing agent’s perspective, this is a matter of professional responsibility. Energy costs form a significant proportion of a service charge budget, and any inaccuracies can undermine both financial planning and resident confidence. This is something we explore further in our article on what happens behind the scenes in block management that leaseholders don’t see, where the hidden layers of financial and operational responsibility are often underestimated.
Expert insight from Joey Kolirin
Energy suppliers do not always take the time to understand how block management works. As a result, they often set up accounts in ways that do not reflect the structure of a residential development.
VAT is a common example. Suppliers frequently treat these accounts as commercial because they sit under a limited company. However, most developments are residential dwellings. This means the VAT rate should typically be set at 5%. When suppliers apply the wrong classification, they also apply the wrong rate.
Debt collection processes create further issues. Suppliers often send letters to the property itself, as this is the entity shown on the account. In practice, this does not work within a block management setting. Letters addressed to a limited company at a residential block are unlikely to reach the right person.
Invoices need to go to the managing agent to ensure they are seen and paid. When suppliers rely on standard processes, payments are missed and issues escalate. In some cases, this increases the risk of disconnection, even when funds are available and the issue is purely administrative.
These challenges highlight a wider problem. Standard industry processes do not align with how block management operates. Without a clearer understanding, small errors can quickly lead to larger risks for both managing agents and residents.
The importance of structure and consistency
Another area that many people underestimate is the level of structure needed to manage energy accounts within block management. Managing agents rarely deal with a single site. Instead, they oversee multiple developments, each with its own legal entity, billing requirements and operational detail.
Without a consistent approach, accounts can quickly become fragmented. Invoices may go to the wrong entity. Supplies can be duplicated or incorrectly linked. Key documents also become harder to track. Over time, this creates extra administrative work and unnecessary inefficiencies.
For residents, the impact is less visible but still significant. Poor account management can lead to confusion over charges and delays in financial reporting. It can also create a wider perception that the building is not being managed effectively.
Strong structure and clear communication are essential. As explored in our guide to managing differing opinions on a resident board, a well-organised approach helps maintain alignment and supports more effective decision-making.
Compliance and risk in leasehold property management
Compliance sits at the heart of everything a managing agent does, and energy procurement is no exception. Leasehold property management requires careful alignment with lease terms, statutory obligations and industry best practice. This includes ensuring that all costs are reasonable, properly incurred and recoverable through the service charge.
If an energy contract or billing structure does not align with these requirements, it introduces a level of risk that can have far-reaching consequences. These may include challenges from leaseholders, complications during year-end accounts, and increased scrutiny during audits or tribunal proceedings.
Energy is therefore not simply a utility, but part of the wider compliance landscape that managing agents must navigate. Alongside financial and contractual obligations, managing agents are also responsible for wider issues within a building, as outlined in our what does a managing agent actually do guide, which highlights just how broad the role can be.
The cost of getting it wrong
When energy management is not handled correctly, the consequences are rarely isolated. What may begin as a minor discrepancy can escalate into a more significant issue over time. Misclassified supplies can result in ongoing overpayments, while poorly structured contracts may limit flexibility and prevent managing agents from responding effectively to changing circumstances.
By the time these issues are identified, the financial impact has often already been felt, and it is typically the leaseholders who bear the cost. Rectifying these situations can be time-consuming and, in some cases, complex, particularly where historic inaccuracies are involved.
CASE STUDY
This was very prevalent during the energy crisis. During the energy crisis (Russia/Ukraine war) energy prices soared and inflated rates was passed through to end users. However, domestic tariffs were protected via the energy price-cap meaning that the impact on personal houses was minimal.
As the block management sector is widely recognised (by energy suppliers) as commercial contracts, this is how they are setup and in the above instance, it resulted in the price cap not being applicable and rates in some cases inflating from circa 25p/kwh to 80-90p/kwh this more than tripled the cost it should have been.
Bridging the gap between two industries
It is important to recognise that this is not a criticism of energy suppliers. The leasehold sector is highly specialised, and without direct experience or dedicated focus, it is not always straightforward to navigate. However, this is precisely why collaboration between managing agents and sector specialists is so valuable.
Those who work closely within block management understand the nuances of lease structures, service charge mechanisms and resident expectations. When that knowledge is combined with expertise in energy procurement and supplier engagement, as seen through specialist firms such as Full Power Utilities, it becomes possible to create solutions that are both commercially effective and operationally appropriate.
Encouragingly, there are signs that the industry is beginning to move in this direction. Suppliers are becoming more aware of the unique requirements associated with landlord and communal supplies, and there is a growing appetite for more tailored products and services.
A more informed approach to block management energy
For managing agents, the goal is not simply to manage energy contracts, but to ensure that they are aligned with the broader objectives of the building. This includes maintaining transparency with residents, ensuring compliance with lease obligations, and supporting long-term financial planning.
This is where collaboration becomes particularly important. By working with specialists who understand both the energy market and the leasehold structure, managing agents are better equipped to make informed decisions, reduce risk and improve outcomes across their portfolio.
When these elements are in place, the result is a more stable and predictable environment, where energy costs are controlled, risks are minimised, and residents have confidence in how their building is being managed.
