Communal heating leaseholders: there's a 14-year-old Ofgem rule that could get you domestic gas rates. Has anyone actually used it?
I'm a shared ownership leaseholder in a ~130 flat block in London with a communal gas-powered heat network. We're each billed individually for our own heating usage through metered Heat Interface Units, and common area heating costs come through the service charge. Our per-kWh rate is 8.13p. Our standing charge is 40.85p a day.
The Ofgem domestic price cap rate is 5.74p. We pay 42% more — not because we use more gas, but because of who holds the gas contract.
Our housing association (the freeholder) buys gas on a commercial tariff and passes the cost to us. They say there's no mark-up — we pay what they pay. But the problem is they're buying at commercial rates in the first place, when the gas is used entirely to heat domestic flats.
I've been digging into why, and it comes down to Ofgem's Classification of Premises rules (SLC 1 and SLC 6 of the gas supply licence). For a communal gas supply to count as "domestic," the entity holding the contract must be directly controlled by residents, must not resell gas commercially, and must pass costs through with no mark-up. Our housing association fails the "direct control" test — they're a registered provider, not a residents' company.
But here's the thing: Ofgem explicitly said in their 2012 Decision Letter (and extended it to electricity in 2015) that a resident-controlled company buying gas through a single meter for domestic use *can* qualify for domestic classification. Their specific example is "a non-profit making management company" where residents have direct control.
So I've been looking at whether we could form a **Residents' Management Company** (company limited by guarantee, every leaseholder a member) that holds *only* the gas supply contract. Nothing else changes:
- The freeholder keeps the boilers, the pipes, the plant room, the maintenance contract with the energy operator (which is a separate contract for which we pay separately on our service charge).
- The RMC appoints the freeholder as its managing agent — they continue billing us individually for metered usage and recovering common area costs through the service charge, exactly as now
- The RMC simply apportions the raw gas bill across flats based on consumption — no mark-up, no profit
- The only thing that moves is the name on the gas supply account
Under SLC 22, gas suppliers are legally required to offer a Domestic Supply Contract to a domestic customer that requests one. If the RMC satisfies the classification test, suppliers can't refuse.
To address the freeholder's concerns, the management agreement would include a **step-in right** — narrowly defined triggers (gas supply lapsing, RMC insolvency, regulatory breach) that let the freeholder retake the contract if something goes wrong. The RMC contractually commits to keeping the freeholder as agent. They lose nothing.
Our lease also helps: it requires the landlord to provide heating "in an efficient and economic manner... for the benefit of the Leaseholder" and "at fair prices."
If a cheaper structure exists and the freeholder won't facilitate it, that's arguably a breach.
Here's the strange part: **I cannot find a single documented example of any UK block that has actually done this.** The rule has existed for 14 years. Hundreds of thousands of households on communal heating are overpaying. The legal pathway is there in black and white. And yet it appears completely unused — suppliers don't offer the product, Ofgem has never enforced the rule, and most RMC directors have no idea it exists.
So I'm hoping someone here knows something I don't:
- **Has anyone here actually done this**, or knows of a block that has? Even if it didn't work out, I'd love to hear what happened.
- **Has anyone approached a gas supplier** (British Gas, Octopus, EDF, etc.) as an RMC and asked for a domestic supply contract for a communal boiler? What was the response?
- **For those on communal heating paying above the domestic cap** — have you considered this route? What stopped you?
- **Any solicitors or managing agents** who can see a flaw in this structure that I'm missing?
Happy to share the Ofgem source documents and the full legal analysis with anyone who
**Key sources:**
- Ofgem, Classification of Premises Decision Letter (2012): https://www.ofgem.gov.uk/publications/decision-letter-classification-premises-purposes-standard-conditions-gas-supply-licence
- Ofgem, Classification of Premises Guidance (2015): https://www.ofgem.gov.uk/publications/guidance-classification-premises-purposes-standard-conditions-gas-and-electricity-supply-licences
- Gas Supply Standard Licence Conditions (SLC 1, 6, 22): https://www.ofgem.gov.uk/sites/default/files/2025-08/Gas-Supply-Standard-Consolidated-Licence-Conditions.pdf