When Did Managing a Block Become Running an Energy Company?

For many residential developments, the answer may be less straightforward than expected. Freeholders, residents' management companies, managing agents and specialist contractors can all be involved in delivering heating and hot water, often under separate agreements. Yet operating a communal heating network is increasingly being recognised as something quite different from managing an ordinary building service. It is effectively the provision of an essential utility, with responsibilities extending well beyond keeping the boilers running.

The accidental energy business

Most residential management organisations never set out to become involved in supplying energy. Nevertheless, a communal heating system can require fuel purchasing, equipment maintenance, heat distribution, customer billing, complaints handling and long-term infrastructure investment. These are responsibilities more commonly associated with an energy company than a property management business.

Ofgem's regulatory framework distinguishes between the heat network operator, which controls and is responsible for the transfer of heat through the network, and the heat supplier, which is responsible for supplying heat to customers and meeting associated consumer obligations. These functions may sit with the same organisation or be divided between different parties.

Importantly, a managing agent does not automatically become the operator or supplier simply because it manages the development. Equally, appointing contractors to maintain equipment or issue bills does not necessarily transfer the underlying legal responsibilities. The determining factors are the actual arrangements, contractual obligations and degree of control exercised by each organisation.

For residents' management companies and Right to Manage companies, this distinction can be particularly significant. Directors who volunteered to oversee their building may discover that the organisation they represent has responsibilities extending into the operation of a regulated energy network.

Who is actually running the heating?

Consider a typical residential development where one contractor maintains the central boiler plant, another services the heat interface units within apartments and a separate company handles metering and billing. The managing agent coordinates these activities, while the freeholder or management company approves major expenditure.

On paper, everyone has a clearly defined role. But who is responsible for the performance of the network as a whole?

The boiler contractor may confirm that the equipment is operating correctly, even though significant amounts of heat are being lost through the distribution pipework. The billing company may issue accurate invoices without knowing whether the heating system is running efficiently. Meanwhile, the managing agent may have limited access to the technical information needed to challenge either provider.

The result can be a fragmented management structure in which every contractor fulfils their individual obligations, but nobody takes responsibility for the overall performance of the system.

This presents a challenge for those overseeing communal heating. Rather than simply ensuring maintenance contracts are in place, there is an increasing need to establish who is monitoring the network's performance, identifying inefficiencies and coordinating improvements across the entire system.

When the heating fails, who takes responsibility?

A lift breakdown is generally straightforward from a management perspective. The contractor is contacted, repairs are arranged and residents are updated. Communal heating failures can be considerably more complicated.

A loss of heating or hot water may affect dozens or even hundreds of households simultaneously, potentially leaving vulnerable residents without an essential service. What begins as a technical fault can quickly become a wider issue involving resident communications, complaints, billing disputes and questions about compensation.

The heat supplier has specific consumer-facing responsibilities, while the operator must address matters relating to the network's operation. The managing agent may still be the first point of contact for residents, even where it is not the regulated supplier or operator.

This makes coordination between the parties essential. Clear escalation procedures, agreed communication responsibilities and effective contingency arrangements can make the difference between a well-managed interruption and a prolonged dispute.

It also raises questions about the resilience of existing arrangements. If the appointed maintenance contractor becomes unavailable, a major component fails or the network requires substantial emergency expenditure, who has the authority and resources to respond?

These are issues that cannot always be resolved through a conventional maintenance contract.

From managing repairs to managing performance

Perhaps the most significant change is the need to move beyond reactive maintenance towards a more strategic approach to communal heating.

Historically, success may have been measured by whether equipment was serviced, breakdowns were attended and residents received heating and hot water. Increasingly, those responsible for the network must also consider whether it is operating efficiently, whether charges are reasonable and whether sufficient investment is being made to maintain its long-term reliability.

This can create difficult decisions for property managers and resident directors. A heating system may continue functioning while becoming progressively less efficient, increasing energy costs and placing additional pressure on service charge budgets.

Addressing these problems may require investment in controls, insulation, metering or ageing equipment. However, the organisation responsible for operating the network may not have direct authority to approve that expenditure, particularly where leaseholder consultation or freeholder approval is required.

The relationship between operational responsibility and financial decision-making therefore becomes increasingly important. Without a clear process for identifying, approving and funding improvements, problems can persist even when their causes are understood.

Long-term asset planning, reliable performance information and clearly allocated decision-making responsibilities are likely to become more important features of effective heat network management.

Should property managers be operating energy networks at all?

For some developments, the changing responsibilities may prompt a more fundamental review of how communal heating is managed.

One option is to strengthen existing arrangements by appointing specialist technical advisers, improving monitoring and bringing maintenance, billing and operational oversight under a more coordinated structure.

Another is to consider whether a specialist energy services company (ESCo) could assume defined responsibilities for operating the network and supplying heat.

Depending on the arrangement, an ESCo may take responsibility for maintenance, energy procurement, billing, performance management and investment in the infrastructure. Some models may also involve transferring ownership of the network, allowing certain operational and financial risks to move away from the existing property management structure.

Such arrangements require careful assessment. Long-term costs, consumer protections, contractual commitments and the precise allocation of responsibilities must all be considered. Appointing a specialist provider does not automatically remove every obligation from the property owner or management organisation.

Nevertheless, for developments struggling with ageing infrastructure, rising costs or increasingly complex management arrangements, reviewing the operating model may be just as important as reviewing the equipment itself.

A different approach to communal heating

The new regulatory landscape has highlighted something that has arguably been overlooked for years. Communal heating is not simply a collection of boilers, pumps and pipes. It is an essential service requiring coordinated technical, financial and customer management.

For managing agents, this does not necessarily mean becoming energy specialists. It means understanding where their responsibilities begin and end, ensuring the appropriate expertise is available and establishing clear accountability for the network's overall performance.

With existing heat networks required to complete their Ofgem registration by 26 January 2027, there is an immediate need to clarify who holds the relevant responsibilities. But registration is only the starting point. The longer-term challenge is ensuring that the organisations responsible for communal heating have the authority, resources and expertise to manage it effectively.

Because when the heating fails, residents are unlikely to be interested in which contractor's agreement covers the problem. They simply want to know who is responsible for putting it right.

In the next article: Why inefficient communal heating could be costing leaseholders more than they realise, and how performance guarantees, alternative funding and different operating models could offer a solution.

Nathan Teakle, Business Development Manager, Heatiliti