Excessive heating charges, faulty system leasehold flat

Malimadness

Morning all,
firstly, excuse my long post - there are so many issues and I fear I may ramble on!
I own a two bedroomed flat in a former care home that was converted into 18 flats in 2022. A commercial district heating system with loop was initially installed by a non registered gas engineer. The two gas boilers are situated in the property’s grounds, not in the residents building. Each flat was supplied with an HIU, which was installed in 2023 - it has not been serviced since that time,
Which brings me to my main questions! My tenants recently received an energy bill for the month of January of approximately £415. This includes an 'admin fee’ of £72 and small standing charge. Their usage for the month of January came to 1121 kWz. According to my tenants, due to previous high billing, they reduced their usage to two hours in the morning and two hours in the evening with the thermostat set to 15c. They are young couple with a newborn baby.  When I was informed of this, I was appalled. My husband and I have offered to pay a large portion of this bill and we are responsible for the 'admin charge' too. 

From speaking to other residents there have been ongoing faults with this system since installation and repeated charges to them for works carried out.
The system is simply not fit for purpose. Unfortunately because the boilers were installed by non registered gas engineer and not one of the manufacturers engineers there is no warranty.
The developers conveniently went into liquidation after completing this project owing over £1,000,000. They  have since set up and continue to run several other building companies. On our lease, they and our management company are listed.
I and the other residents have contacted various organisations, authorities, energy companies, managing agent and even our local MP, with absolutely no progress made. It appears we are stuck with an inefficient system that costs a small fortune to use with no recourse.
I would be very grateful for any advice and will answer any questions to the best of my knowledge.
Thanks in advance.

DullGreyGuy

How is the system supposed to work? A former colleague had a similar setup several years ago, with theirs the bill for running the system, mainly the gas which inevitably is at commercial not residential rates, was proportioned against all the residents proportionally based on the units used as recorded by the heat exchange.  The freeholder/MA wasnt making anything via higher usage and the residents were split because those getting the high bills were unhappy and those getting low bills due to others high usage clearly didnt mind the situation continuing. 

It took them 18 months or so for the exchanger finally to be confirmed as faulty but then that didnt make them popular with their neighbours when the bills were rebalanced and they had to cover their share of what she had overpaid. 

QrizB

Malimadness said:

The two gas boilers are situated in the property’s grounds, not in the residents building. Each flat was supplied with an HIU, which was installed in 2023 - it has not been serviced since that time,

So there's a circulating hot water loop, with each flat having a Heat Interface Unit - HIU - which is essentially an MID-metered heat exchanger. The HIU fills the role of the "boiler" in a conventional heating system, supplying heat to the flat's own central heating loop which serves the radiators and (potentially) a hot water tank. Have I got that right?

A HIU wouldn't normally require much in the way of servicing.

Does the HIU give a reading of kWh metered, much like a conventional energy meter would? Have you and/or your tenants been taking regular readings?

Malimadness said:

Which brings me to my main questions! My tenants recently received an energy bill for the month of January of approximately £415. This includes an 'admin fee’ of £72 and small standing charge. Their usage for the month of January came to 1121 kWz. According to my tenants, due to previous high billing, they reduced their usage to two hours in the morning and two hours in the evening with the thermostat set to 15c. They are young couple with a newborn baby.

January was a cold month, and 1121kWh wouldn't be an unusually large amount of heat to use during January. 32kWh of heat a day would be almost 1000kWh.
I don't think you've said how big this flat is, or how well insulated. What does the EPC say?

Malimadness

Residents pay for their usage of the loop/gas. The loop cost was put to a vote amongst residents - shared equally or split by each residents usage.  The decision was made to keep bills as individual usage, because those whose bills increased if it became a shared equal set up (even though a fairer system) didn’t want slightly higher bills. The problem is the system doesn’t work efficiently. There are rumours that it only works at about 35% efficiency.

Malimadness

QrizB said:

Malimadness said:

The two gas boilers are situated in the property’s grounds, not in the residents building. Each flat was supplied with an HIU, which was installed in 2023 - it has not been serviced since that time,

So there's a circulating hot water loop, with each flat having a Heat Interface Unit - HIU - which is essentially an MID-metered heat exchanger. The HIU fills the role of the "boiler" in a conventional heating system, supplying heat to the flat's own central heating loop which serves the radiators and (potentially) a hot water tank. Have I got that right?

A HIU wouldn't normally require much in the way of servicing.

Does the HIU give a reading of kWh metered, much like a conventional energy meter would? Have you and/or your tenants been taking regular readings?

Malimadness said:

Which brings me to my main questions! My tenants recently received an energy bill for the month of January of approximately £415. This includes an 'admin fee’ of £72 and small standing charge. Their usage for the month of January came to 1121 kWz. According to my tenants, due to previous high billing, they reduced their usage to two hours in the morning and two hours in the evening with the thermostat set to 15c. They are young couple with a newborn baby.

January was a cold month, and 1121kWh wouldn't be an unusually large amount of heat to use during January. 32kWh of heat a day would be almost 1000kWh.
I don't think you've said how big this flat is, or how well insulated. What does the EPC say?

You are correct. I am unsure of the size exactly. It is a split level flat though. The EPC from 2023 is rated C. 

Malimadness

Malimadness said:

QrizB said:

Malimadness said:

The two gas boilers are situated in the property’s grounds, not in the residents building. Each flat was supplied with an HIU, which was installed in 2023 - it has not been serviced since that time,

So there's a circulating hot water loop, with each flat having a Heat Interface Unit - HIU - which is essentially an MID-metered heat exchanger. The HIU fills the role of the "boiler" in a conventional heating system, supplying heat to the flat's own central heating loop which serves the radiators and (potentially) a hot water tank. Have I got that right?

A HIU wouldn't normally require much in the way of servicing.

Does the HIU give a reading of kWh metered, much like a conventional energy meter would? Have you and/or your tenants been taking regular readings?

Malimadness said:

Which brings me to my main questions! My tenants recently received an energy bill for the month of January of approximately £415. This includes an 'admin fee’ of £72 and small standing charge. Their usage for the month of January came to 1121 kWz. According to my tenants, due to previous high billing, they reduced their usage to two hours in the morning and two hours in the evening with the thermostat set to 15c. They are young couple with a newborn baby.

January was a cold month, and 1121kWh wouldn't be an unusually large amount of heat to use during January. 32kWh of heat a day would be almost 1000kWh.
I don't think you've said how big this flat is, or how well insulated. What does the EPC say?

You are correct. I am unsure of the size exactly. It is a split level flat though. The EPC from 2023 is rated C. 

I have checked my lease - the flat is 81 square metres.

Malimadness

The gas boilers were inspected by a Gas safe engineer in September 2024. They were classed as 'at risk’. According to a resident, it wasn’t condemned because the boilers are installed in the grounds and not in the residents building.

QrizB

Malimadness said:

Malimadness said:

QrizB said:

Malimadness said:

The two gas boilers are situated in the property’s grounds, not in the residents building. Each flat was supplied with an HIU, which was installed in 2023 - it has not been serviced since that time,

So there's a circulating hot water loop, with each flat having a Heat Interface Unit - HIU - which is essentially an MID-metered heat exchanger. The HIU fills the role of the "boiler" in a conventional heating system, supplying heat to the flat's own central heating loop which serves the radiators and (potentially) a hot water tank. Have I got that right?

A HIU wouldn't normally require much in the way of servicing.

Does the HIU give a reading of kWh metered, much like a conventional energy meter would? Have you and/or your tenants been taking regular readings?

Malimadness said:

Which brings me to my main questions! My tenants recently received an energy bill for the month of January of approximately £415. This includes an 'admin fee’ of £72 and small standing charge. Their usage for the month of January came to 1121 kWz. According to my tenants, due to previous high billing, they reduced their usage to two hours in the morning and two hours in the evening with the thermostat set to 15c. They are young couple with a newborn baby.

January was a cold month, and 1121kWh wouldn't be an unusually large amount of heat to use during January. 32kWh of heat a day would be almost 1000kWh.
I don't think you've said how big this flat is, or how well insulated. What does the EPC say?

You are correct. I am unsure of the size exactly. It is a split level flat though. The EPC from 2023 is rated C. 

I have checked my lease - the flat is 81 square metres.

That's bigger than my first three-bed semi was, then. Heating demand (shown on the EPC) might be 8-9000kWh/yr?

1000kWh in January isn't that implausible.

gm0

Oh dear - what a mess. 

Absent warranty between supplier and now dead development company.  Which used the wrong subcontractors and invalidated manufacturer warranty.  Maybe improper fitment in reality. Or not.  Neither company do you have a contract with.  And the sub may have done what they were asked and quoted to do.  Fault almost certainly lies with the insolvent developer for any dubious specification (the type and size of system), insulation, and its cost cutting fitment invalidating a warranty they didn't care about. 

Looks a mess where legal actions are unlikely to be a realistic option. 

Paying for "independent" inspection (that the manufacturer recognises) of the actual installation being to spec or not. (Rather than club membership).  And trying to reverse back into the warranty with the manufacturer - may be a long shot possibility or a fools errand.  I have no experience of attempting that.  They have no financial incentive to agree - only one of reputation and basic belief in the quality of their product.   Even if you go that way - you may find you lock back in to a sub-set of installer/maintainers - club members. And can't shop around for servicing to keep the warranty.  Depending on the length of said warranty from new.  This may not be worth the bother at this point in any event.


The question that arises is the status of the freehold now.

Your ability to "control" what happens next depends on the leases and decisions you collectively take.

Such as your invoking of Right To Manage - appointing and directing your own agent.  And instructing them on commissioning investigation, inspection and repair around this.  Or even Freehold enfranchisement.  All of which are effort (and a lot harder in a retiree heavy setting - lack of motivation and fixed incomes they don't want increased costs against). 

And in the case of freehold purchase - expensive.  A levy for several years - perhaps 5 - for a loan to buy it out.  The end of the journey is "control" for the leaseholding residents who now own the whole thing.

Now the current freeholder can be pushed (via agent working on their behalf) under the lease to investigate and "assess" and "fix" - the current system.  And they can and almost certainly will recharge these costs to all leaseholders.  Investigation and repair.  So you will need to generate enough complaining collectively.  So they don't get blowback on the costs incurred from listening to one individual resident moaning.  Like it or not these systems have a degree of inertia.  By design.  So that the community knows that the agent should, and belatedy is - doing something about x.

Gather data (across flats).  Identify the range of people who keep it hot vs cool.  And what outliers look like - faults.  And usage.  This heatload data will be useful to avoid wasted effort. And spot faults.  And plan a replacement later.

Replacing some parts so that it works as well as it can and you have good data on its economics - looks like a fruitful and fairly simple way forward. 

A "better" system could be considered and negotiated (via freehold purchase, rtm, or simplly by discussion with agent and freeholder. 

The freeholder is not allowed to just go and commission a "new different system" and recharge you all. So they won't do that. They should stick to broadly like for like repair and replacement at end of life (which it isn't) - which they can recharge via the existing leases.  They may be more open to discussion - once it is clear all leaseholders are on board with a path forward.

Now it may be that electric boilers could be fitted to individual flats.  But the electricity supply to the building itself might need upgrading for any/more than a few/for all.  Power upgrades can be tens of thousand.  Perhaps you need to do that anyway for electric car chargers.  Perhaps you don't and wont'.

Fitting gas if not present to individual flats would be a problematic and invasive job. The hour is late. This type of system was confgured into the project for a reason.  Possibly to avoid some other more costly structure work of some sort. It's not obvious.  For some ground floor situations it might be practical but not for others.

A large heatpump as communal heating would require a substantial  electricity supply instead of the gas feed.  Though you have an outbuilding/spot for it and water distribution.  This would need careful design and planning to assess whether the pipe work sizes and flows could cope at low heat pump operating temperatures.  Commercial gas contract becomes a commercial electric one.  You take a view on what will happen to the prices of both of those in coming years.

Individual electric boilers / radiators - are still a heating system for flats of last resort. 

And putting individual systems in. (with permission to touch the communal system) if you have to rather than demised plumbing. Could be a way forward.  Yet it doesn't relieve you of the lease obligations to pay the 1/n "fixed" shared cost of the communal system - an obligation which will (quite likely) remain in your lease even if you turn off the heating. Your metered usage would of course drop to zero.  The agent and freeholder would be unwise to agree to let you opt out of fixed costs - as with diminishing numbers there will be increasing problems later recovering the cost of the communal system serving only part of the estate.   Their clear incentive is to let you disconnect your pipes - but maintain the fixed cost charge (in the lease - as is).  It's your choice. But it's still your bill.

They could agree a more considered replacement project.  If ALL of you want to do - and pay for - that project.  It will have to be VERY inefficient.  Before the community will see the payback as "soon enough".  And accept the need to pay for it out of service charges.   Expect a mix of apathy and active resistance.

The presence on the lease of the developer name on paperwork is not surprising of itself.  Leases and dividing and demising out of units often have a trail of initial land transfer, rearranging, sub-leasing and owning interest transfers with the developer exiting after units are sold.  What matters is who is the freeholder interest now.  And who is their appointed agent.  If you intend to collectively (with a majority of residents agreeing) to go after right to manage or buying out the land (share of freehold).  And taking more or full control. 

Then these are the people you go to agree it with as a negotiated transaction.  Absent such agreement. You can impose the legal right for leaseholders to purchase at the defined value via the formal process.  Those calculations don't much care if you have good or bad windows roofs lifts or boilers.  There is a legal formula for freehold value under enfranchisement.  It can be a bargain - particularly if there are gardens (land) and it still has development potential.  Or not. Then that land is of course both a nice garden costing money to maintain, a view for some units,  and a potential source of capital to pay for various improvement works you know or think your block needs.  Buy freehold. Sell part of land to developer (with planning).  New block goes up.  Garden costs down. View spoiled. Use capital so obtained to pay for things which need upgrading.  It's loads of work and you have to wheedle all your residents into understanding it and being prepared to put up with the up front costs, the process and the project.  Realistically it is 5-10 years before peace fully returns and benefits of upgrades are felt.  Some elderly folk will take the view - that's the rest of my life - and I don't want the hassle - so I vote no.  Not unreasonable but a rolling population of such people will freeze a community into grumpy inaction.


From the limited facts in the post.  I somewhat doubt you have support for expensive journeys on freehold and a project to do a new system across enough residents being asked to fund it. 

This leaves

- Put up with it - leaving the what the replacement system should be discussion until life expired - perhaps 20 years- could be less. Could be more.  Start the discussion at an appropriate time.

- Move

AND

Gather data from other units - determine the difference between "low" and "high" users.  And "faults".  And make sure you push the agent on getting faults serviced properly. Rather than people getting fobbed off.  And also keeping an eye on the admin of billing.

Malimadness

gm0 said:

Oh dear - what a mess.  

Absent warranty between supplier and now dead development company.  Which used the wrong subcontractors and invalidated manufacturer warranty.  Maybe improper fitment in reality. Or not.  Neither company do you have a contract with.  And the sub may have done what they were asked and quoted to do.  Fault almost certainly lies with the insolvent developer for any dubious specification (the type and size of system), insulation, and its cost cutting fitment invalidating a warranty they didn't care about. 

Looks a mess where legal actions are unlikely to be a realistic option. 

Paying for "independent" inspection (that the manufacturer recognises) of the actual installation being to spec or not. (Rather than club membership).  And trying to reverse back into the warranty with the manufacturer - may be a long shot possibility or a fools errand.  I have no experience of attempting that.  They have no financial incentive to agree - only one of reputation and basic belief in the quality of their product.   Even if you go that way - you may find you lock back in to a sub-set of installer/maintainers - club members. And can't shop around for servicing to keep the warranty.  Depending on the length of said warranty from new.  This may not be worth the bother at this point in any event.


The question that arises is the status of the freehold now.

Your ability to "control" what happens next depends on the leases and decisions you collectively take.

Such as your invoking of Right To Manage - appointing and directing your own agent.  And instructing them on commissioning investigation, inspection and repair around this.  Or even Freehold enfranchisement.  All of which are effort (and a lot harder in a retiree heavy setting - lack of motivation and fixed incomes they don't want increased costs against). 

And in the case of freehold purchase - expensive.  A levy for several years - perhaps 5 - for a loan to buy it out.  The end of the journey is "control" for the leaseholding residents who now own the whole thing.

Now the current freeholder can be pushed (via agent working on their behalf) under the lease to investigate and "assess" and "fix" - the current system.  And they can and almost certainly will recharge these costs to all leaseholders.  Investigation and repair.  So you will need to generate enough complaining collectively.  So they don't get blowback on the costs incurred from listening to one individual resident moaning.  Like it or not these systems have a degree of inertia.  By design.  So that the community knows that the agent should, and belatedy is - doing something about x.

Gather data (across flats).  Identify the range of people who keep it hot vs cool.  And what outliers look like - faults.  And usage.  This heatload data will be useful to avoid wasted effort. And spot faults.  And plan a replacement later.

Replacing some parts so that it works as well as it can and you have good data on its economics - looks like a fruitful and fairly simple way forward. 

A "better" system could be considered and negotiated (via freehold purchase, rtm, or simplly by discussion with agent and freeholder. 

The freeholder is not allowed to just go and commission a "new different system" and recharge you all. So they won't do that. They should stick to broadly like for like repair and replacement at end of life (which it isn't) - which they can recharge via the existing leases.  They may be more open to discussion - once it is clear all leaseholders are on board with a path forward.

Now it may be that electric boilers could be fitted to individual flats.  But the electricity supply to the building itself might need upgrading for any/more than a few/for all.  Power upgrades can be tens of thousand.  Perhaps you need to do that anyway for electric car chargers.  Perhaps you don't and wont'.

Fitting gas if not present to individual flats would be a problematic and invasive job. The hour is late. This type of system was confgured into the project for a reason.  Possibly to avoid some other more costly structure work of some sort. It's not obvious.  For some ground floor situations it might be practical but not for others.

A large heatpump as communal heating would require a substantial  electricity supply instead of the gas feed.  Though you have an outbuilding/spot for it and water distribution.  This would need careful design and planning to assess whether the pipe work sizes and flows could cope at low heat pump operating temperatures.  Commercial gas contract becomes a commercial electric one.  You take a view on what will happen to the prices of both of those in coming years.

Individual electric boilers / radiators - are still a heating system for flats of last resort. 

And putting individual systems in. (with permission to touch the communal system) if you have to rather than demised plumbing. Could be a way forward.  Yet it doesn't relieve you of the lease obligations to pay the 1/n "fixed" shared cost of the communal system - an obligation which will (quite likely) remain in your lease even if you turn off the heating. Your metered usage would of course drop to zero.  The agent and freeholder would be unwise to agree to let you opt out of fixed costs - as with diminishing numbers there will be increasing problems later recovering the cost of the communal system serving only part of the estate.   Their clear incentive is to let you disconnect your pipes - but maintain the fixed cost charge (in the lease - as is).  It's your choice. But it's still your bill.

They could agree a more considered replacement project.  If ALL of you want to do - and pay for - that project.  It will have to be VERY inefficient.  Before the community will see the payback as "soon enough".  And accept the need to pay for it out of service charges.   Expect a mix of apathy and active resistance.

The presence on the lease of the developer name on paperwork is not surprising of itself.  Leases and dividing and demising out of units often have a trail of initial land transfer, rearranging, sub-leasing and owning interest transfers with the developer exiting after units are sold.  What matters is who is the freeholder interest now.  And who is their appointed agent.  If you intend to collectively (with a majority of residents agreeing) to go after right to manage or buying out the land (share of freehold).  And taking more or full control. 

Then these are the people you go to agree it with as a negotiated transaction.  Absent such agreement. You can impose the legal right for leaseholders to purchase at the defined value via the formal process.  Those calculations don't much care if you have good or bad windows roofs lifts or boilers.  There is a legal formula for freehold value under enfranchisement.  It can be a bargain - particularly if there are gardens (land) and it still has development potential.  Or not. Then that land is of course both a nice garden costing money to maintain, a view for some units,  and a potential source of capital to pay for various improvement works you know or think your block needs.  Buy freehold. Sell part of land to developer (with planning).  New block goes up.  Garden costs down. View spoiled. Use capital so obtained to pay for things which need upgrading.  It's loads of work and you have to wheedle all your residents into understanding it and being prepared to put up with the up front costs, the process and the project.  Realistically it is 5-10 years before peace fully returns and benefits of upgrades are felt.  Some elderly folk will take the view - that's the rest of my life - and I don't want the hassle - so I vote no.  Not unreasonable but a rolling population of such people will freeze a community into grumpy inaction.


From the limited facts in the post.  I somewhat doubt you have support for expensive journeys on freehold and a project to do a new system across enough residents being asked to fund it. 

This leaves

- Put up with it - leaving the what the replacement system should be discussion until life expired - perhaps 20 years- could be less. Could be more.  Start the discussion at an appropriate time.

- Move

AND

Gather data from other units - determine the difference between "low" and "high" users.  And "faults".  And make sure you push the agent on getting faults serviced properly. Rather than people getting fobbed off.  And also keeping an eye on the admin of billing.

Wow, thank you so much for your comprehensive reply - much appreciated.
 I believe the residents are going for the right to manage option and instructing a new management company. There has also been talk of installing individual electric heating but as you point out, residents will still have to pay for the loop system and on balance will not be financially beneficial. 

I am concerned about the £72 admin charge for billing and don’t understand where this money is going and what exactly it is for. Eighteen flats at £72 a month is a nice little earner imo, just for data collected and a bill print out. Maybe I am naive and simply don’t understand how these Companies operate?

Malimadness

gmo - the developer is still the landlord but registered under a different Company name. The director of the Management Company is Secretary on another of the developers Companies. The residents were emailed regarding three different tender offers and a follow up from the energy Company chosen listing charges. The only charge the residents agreed to was the 5.5p per kWh. The cost, is in fact, over 10p per kWh. Any difficult but pertinent questions addressed to the managing agent are either ignored or the sender is accused of 'being rude’ and communication ended. 

The residents feel that the managing agent is disingenuous at best and he has openly stated his interests lie with the developer and not the residents.