Making Sense Of Deemed Contracts

• Published date: 26 July 2021
• Subject Matter: Corporate/Commercial Law, Real Estate and Construction, Energy and Natural Resources, Contracts and Commercial Law, Energy Law, Landlord & Tenant - Leases
• Law Firm: Shakespeare Martineau
• Author: Mr Tim Speed

Making sense of a deemed contract as a commercial landlord

During the pandemic, many thousands of tenants have chosen to delay payments of their rent. This is adversely effecting cash flow for landlords, who still have outgoings to pay.

As tenants vacate premises in the future, either through choice at the end of the lease, or being forced due to insolvency, the predicament of landlords will worsen as they are faced with vacant premises.

One of the many considerations for the landlord is the cost of the utilities being supplied to the vacant premises.

If there is no contract for supply in place, gas and electricity will be supplied by way of a deemed contract.

What is a deemed contract?

In the context of electricity, a deemed contract is created by the Electricity Act 1989, which states that 'where electricity is supplied otherwise than in pursuance of a contract, the supplier shall be deemed to have contacted with the occupier (or the owner if the premises are unoccupied) for the supply of electricity.'

There are similar provisions in relation to gas in the Gas Act 1986.

It follows that where a property is vacant there is a deemed contract between the supplier and the landlord.

A landlord may try to argue that the lease has not been disclaimed and as it is still in place, the deemed contract is with the tenant.

However, as can be seen from above, the legislation imposes a liability on the occupier of the premises and if the premises are unoccupied, the owner. It does not on the face of it impose a liability upon a tenant who no longer occupies a premises, irrespective of whether the lease remains in place.

Why are deemed contracts important?

They're important because deemed contracts are legal and enforceable by energy suppliers...