Business to Domestic - am I stuck (and now bankrupt)?

jamieleighton

My father-in-law used to run a pub, which shut in 2019. For the past few years he's been renovating the pub to create two holiday homes for Airbnb etc. He's a 71-year-old bloke, and had been a landlord his whole life.

Last year, with all the energy crisis and heavy news coverage, he was contacted by an energy broker as his business gas and electricity contracts were ending. They said he should continue with business accounts and meters, and as he was planning on running the Airbnbs, he assumed he would still need business rates.

He signed up to Gas (starting Dec 2022) and Electricity (starting April 2023) with Smartest Energy for 3 years fixed, with pretty high rates as they were agreed in August last year when panic and prices were at their highest. He was speaking to some random person (as landlords do...) who said that he should be on a domestic rate, and he was paying through the roof and not getting any government support. This is the point when he reached out to us! 

We're fairly confident that he should be on a domestic contract and meter, and the two contracts he's agreed to for gas and electricity with Smartest Energy in theory should be void.

They are adamant that as he's agreed to them, he needs to pay their "reasonable early cancellation fee" which is a penalty of 3 months estimated usage (which is just under £2k) for Electricity which is due to start next month! For Gas, which has been live since Dec 2022 they are arguing he needs to pay the estimated usage until the end of the contract, which is around £22,000!

We're looking to go to deadlock with Smartest Energy, and go to the Ombudsmen - but this will take him past the start of his Electricity contract and means he would either need to pay the £2k to cancel it, or be at risk of needing to pay 3 years of estimated bills as a penalty. 

Does anyone have any advice on:
- whether running two Airbnbs from a single desk in his home means he would be considered a business? I use running loosely as he's outsourcing the bulk of it. 
- whether the contract would be void as he's not a business?
- whether he would be liable to pay these penalties if cancelling? Do energy suppliers have to do any due diligence to make sure that they are selling the correct products?
- how to change from a business to domestic meter and rates, when Smartest Energy won't help as they don't offer domestic rates? Other companies won't offer a price as it shows he's in contract with Smartest Energy? 

Thanks for reading, and hopefully for your help too! Sorry for the essay, hopefully this gives people the information they need to hopefully give my father-in-law a good nights sleep for the first time in a few months.

Robin9

Your FIL has dug a hole for himself and its difficult to see a way out that's not going to cost money.

The Business market does not have the protection of the Domestic. I've got Business tariffs but never had one where I've committed to a certain consumption which it looks like FIL has.

He could give formal notice for the Electricity and terminate that contract and pay £2000.  Having given notice he can contact another supplier  and I suggest the big 6 who offer both Business and Domestic and make an application to them and then change internally to Domestic  -   actually one for each property.

Similarly for gas but wait one month before the end of the contract - put that date in the diary in BIG LETTERS.

molerat

Surely a full time Air BNB is a commercial property and not domestic ?

Jonboy_1984

Robin9 said:

Your FIL has dug a hole for himself and its difficult to see a way out that's not going to cost money.

The Business market does not have the protection of the Domestic. I've got Business tariffs but never had one where I've committed to a certain consumption which it looks like FIL has.

He could give formal notice for the Electricity and terminate that contract and pay £2000.  Having given notice he can contact another supplier  and I suggest the big 6 who offer both Business and Domestic and make an application to them and then change internally to Domestic  -   actually one for each property.

Similarly for gas but wait one month before the end of the contract - put that date in the diary in BIG LETTERS.

I have dealt with several business contracts that have an estimated consumption but only bill on that actually used. As you say businesses are expected to be competent and don’t have the same protections as consumers.


Obviously the contracts will quite likely only stand whilst the contract holder occupies the building and would likely cease if sold or a tenant gets a lease.

If he was planning to switch the premise to domestic use (e.g, longer term let’s rather than AirBnB) then their terms 9.2 and 9.3 might well apply.

Mstty

What are the business rates are they really that bad?

jamieleighton

Mstty said:

What are the business rates are they really that bad?

Electricity is 28.73p/day standing rate, and 55.35p / kWh. They've estimated his consumption at 12,000 kWH per year, which has driven his monthly payment to £644!

Gas is 25p / day standing charge, and 18.55p / kWH with 10,000 kWh as the estimated annual consumption. 

He's got a fairly big house, but not that big! And the contract states that if the estimated usage is lower than expected, they have the ability to increase the unit rates of both. 

GingerTim

What are the actual usage figures for the properties, as opposed to their estimated figures? 

Robin9

Fairly typical business rates.

Are either of the properties occupied yet ?

jamieleighton

Robin9 said:

Fairly typical business rates.

Are either of the properties occupied yet ?

The property with these rates is actually his house, not one of the Airbnbs. He's got a small desk area in it, like most people's work from home set ups, and because he would be doing admin for the rentals in his house (and he's always been on business rates) he assumed he would need to continue as business. 

Smartest Energy are maintaining he is in contract with them, and would need to pay the £2k fee, which I think he's going to press ahead with. He's managed to get in contact with Scottish Power who have offered to switch him to domestic for electricity - so hopefully that's promising, even if he does have to pay the £2k fee, I think he'll still be making a saving after the first year. My understanding is that Smartest Energy have been horrible to deal with. 

Gas is another matter, and he may just need to take that on the chin at this stage. 

GingerTim said:

What are the actual usage figures for the properties, as opposed to their estimated figures? 

Not entirely sure, but it will be a lot less than that - it's bloody freezing there as he's too scared to heat the house!