Following a recent story run by Property Industry Eye, we were asked to comment on the practice of letting agents obtaining consent to switch energy suppliers on behalf of landlords.
Whilst TPO has only received a small number of complaints from tenants or landlords in relation to letting agents switching energy providers for a property without their authorisation, we feel it is important to give clarity over what is expected of letting agents in this situation.
The incentive for agents to switch suppliers is commission, usually earned on each property in their portfolio when switched. The supplier usually completes all of the administration in relation to the switch, therefore, agents are presented with the opportunity to earn money through little or no effort on their part, simply by entering into an agreement with a new supplier.
Our concern is the manner in which the letting agent goes about switching the energy suppliers to the properties in their portfolio and the effect their actions have on the landlord.
In one case we considered, the agent took the decision to switch the energy supplier to the property without consulting either the tenant or the landlord (the complainant).
The agent was instructed on a Let Only basis and, as such, the issue came to light when the tenant raised the matter with the landlord. The landlord then raised the issue with the agent, who acknowledged that the switch had been instructed by them in error, as the property was not managed by them. However, despite this acknowledgement, the agent gave the landlord little assistance in transferring the utilities back to his preferred provider.
In short, due to a number of restrictions imposed by the supplier and the agent’s lack of assistance, the landlord spent a period of five months switching the energy provider back.
The complaint was supported on the basis that the agent’s action could not be considered consistent with fairness, integrity or best practice and that the effect on the landlord was to cause him avoidable and unnecessary distress, aggravation and inconvenience. An award was made covering both aspects.
However, the agent could have avoided the latter, had they themselves rectified the problem that they had created by taking up the matter on the landlord’s behalf with the energy supplier.
I did not consider that whether the property was managed or not by the agent was relevant to this case. However, the agent’s acknowledgement that they had acted in error as the property was not managed by them, inferred that if it had have been managed, they would have considered that the switch would have occurred correctly.
Indeed, email correspondence from the supplier to the landlord disclosed that they considered that the Tenancy Agreement, drawn up by the agent, gave them the authority to provide the tenants with electricity and gas.
Whilst the suppliers were wrong in this instance, one of the methods used by letting agents to gain the landlord and the tenant’s authorisation for the switch, is to insert a clause in the Tenancy Agreement.
In this case, if the letting agent had wished to transfer energy providers, the fair way would have been to write to the landlord and, especially, the tenant, explaining what they intended to do, why it was beneficial for the landlord/tenant, and the timescale involved. The landlord and tenant would have then been provided with the opportunity to voice any concerns before the switch occurred.
However, if the practice of switching energy suppliers is something which an agent carried out regularly, they this should be flagged to the landlords from the very beginning.
Under 5p (Fees and Charges) of TPO’s Codes of Practice for Residential Letting Agents, agents are advised that where your terms of business include options for landlords to use associated and/or recommended services (such as inventory services), landlords should be presented with the opportunity to actively opt-in to use the service.
Requiring landlords to actively opt-out of any additional or recommended service should be avoided. Charges made for not using a service must be disclosed in accordance with the CPRs.
Therefore, we would expect agents to take the same approach to opting-in (rather than having to proactively opting-out) in relation to changing the energy supplier at a landlord’s property, and actively flag any entitlement to commission as a result.
Agents who do not give landlords a clear opportunity to positively consent to having their utility provider changed should make amendments to their Terms of Business as soon as possible.
Although this is not yet a commonly arising cause for complaint, should this become more prominent, we will look to explicitly state this as a requirement in our Codes of Practice.