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Understanding Section 20 dispensation for Housing Associations

Accessing longer-term energy procurement contracts for better management of costs and budgets

 06 September 2023

The rising energy market has presented many challenges for organisations, housing associations included. Increased energy costs can have a large impact on tenant service charges and securing the best price for energy has become a growing priority.

Historically when it comes to securing an energy contract, some housing associations have chosen to secure a 12-month contract to avoid having to comply with the consultation requirements of Section 20 of the Landlord and Tenant Act 1985.

However, in the current rising market, this does not represent the best value and can lead to a negative impact on residents in the form of higher service charges than they would otherwise need to pay. Seeking dispensation from Section 20 can unlock the opportunity to help secure better prices and support greater budgeting certainty. Here we take a closer look at the benefits of securing a longer-term energy contract.

What is Section 20 of the Landlord and Tenant Act?

The Section 20 process has been on the statute book since 1985 when the Landlord and Tenant Act was introduced. It states that tenants who pay a service charge and have a significant interest in their property should be consulted with by the landlord before the landlord embarks on any major works or enters into any long-term contracts for good and services – such as energy contracts.

This means that for any contracts where the landlord intends to charge tenants an additional £100 per annum threshold for a property and/or last over 12 months, the landlord is required to conduct a Section 20 consultation process involving the residents. This process takes a minimum of three months but can often take longer.

What are the benefits of securing a longer-term energy contract?

Historically some housing organisations have secured 12-month contracts for their energy which means that they are not obligated to comply with Section 20. However, with the recent increase in energy costs, 12-month contracts do not offer the options and flexibility for securing the best price and with a duty to keep resident service charges low, looking at longer-term contracts will be in the tenants’ best interests.

Yet, at the same time, the energy market in general doesn’t allow for consultation over a 3-month period of time to secure the best contracts. Pricing on the energy market changes on a daily basis which makes a 3-month consultation period impractical.

Therefore, to secure a qualified long-term agreement (QLTA) whilst remaining compliant organisations can apply for Section 20 Dispensation which allows the tenant consultation process to be reduced. Landlords can make an application under Section 20 to ask the Tribunal to dispense with the requirements to consult. These applications are made in circumstances where the works are so urgent that the landlord does not have time to consult – this would apply where urgent repairs are required to a property and or, in this instance, where the market doesn’t allow for a lengthy review process.

Whilst this option does present more administrative work at the beginning of a project, the current increase in energy costs means that it is often worth the extra time spent to secure the optimal prices over a longer term.

Longer-term contracts can help in a number of different ways:

  • Flexibility

By planning ahead, your organisation gains access to more procurement opportunities that are not available when contracting for just 12 months. This gives flexibility in the types of contracts that can be secured giving your organisation access to more and better options.

  • Forecasting and Budgets

The commodity element of gas and power contracts can be traded on the wholesale market up to six years ahead. This means that by securing a longer-term contract your organisation can better forecast costs and budgets which helps prevent drastic service charge variations for your residents.

  • Save time and resource

By contracting for a longer period, you will reduce the amount of time your organisation spends each year renewing contracts.

Applying for Section 20 dispensation

To access Section 20 dispensation, organisations have to apply to the first-tier tribunal and  “describe the qualifying works or qualifying long-term agreement concerned, stating when the works were carried out or planned to be carried out or in the case of a long-term agreement, the date that agreement was entered into or the proposed date it is to be entered into”. You can read more about the requirements here.

Inenco can help support your application to the first-tier tribunal, supplying the required energy-related documentation and evidence as part of a witness statement. However, we would also always encourage you to take appropriate legal advice.

Mitigate rising energy costs with an effective long-term energy procurement strategy.

Some leading housing associations have been able to secure £ million in benefits for their residents by taking full advantage of Section 20 dispensation. Whereas some of the less enlightened have inadvertently handed an often-unnecessary additional financial burden onto their residents. Long-term energy contracts often provide the best value and flexibility for both organisations and residents and can help to mitigate against any future price fluctuations.

To find out more about how Inenco can help your organisation with long-term procurement strategies, please speak to one of our housing experts at 08451 46 36 26 or email