Federal Court holds that a lease clause for the sale of electricity was unenforceable

The National Energy Retail Law (NERL) regulates the retail sale of electricity and gas, though there are State by State changes to the application of that law.

Landlords selling electricity and gas to tenants need to hold a retail authorisation or an exemption under the NERL. In many cases the exemptions are not automatic and must be applied for. For landlords of commercial properties, the deemed exemption only applies if you have less than 10 tenants buying electricity from you.

The Federal Court has recently held that a fairly standard lease clause allowing the landlord to charge a tenant for supplied electricity was unenforceable because the landlord did not hold an exemption or authorisation required by the NERL as it applies in Queensland. The case is Pipe Networks Pty Ltd v 148 Brunswick Street Pty Ltd [2019] FCA 598. 

Long story short, Justice Derrington found that the lease clause was unenforceable on the ground of illegality while the landlord did not have the exemption. The landlord did ultimately get the exemption registered and from that date was entitled to start charging for electricity.

The important issues for landlords selling electricity or gas to tenants are:

• make sure you have registered for an exemption or fall into the deemed exemption category (under the NERL it is less than 10 tenants buying electricity from you)
• whether you hold a registered or deemed exemption, your selling arrangements must comply with the exemption conditions (which may be different to the clause in your lease)
• if you have been selling electricity without an exemption your tenants may be entitled to claim a refund of the money paid.

Author: Peter Nugent 

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Published by:

Peter Nugent

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