Rendall & Rittner makes nearly £1 million a year in gas and electricity commissions
By Liam Spender, Leasehold Knowledge Partnership
With energy prices sky-rocketing, Rendall & Rittner leaseholders will be concerned to learn that their managing agent receives £969,000 a year in commission on communal gas and electricity supplies.
According to a letter posted on Rendall & Rittner’s blog, the commissions are paid at the rate of 0.03 pence per unit (kilowatt hour) of electricity. Gas attracts a lower commission of 0.015 pence per unit.
According to the letter, Rendall & Rittner estimates it buys of 182 gigawatts of electricity and 282 gigawatts of gas each year. This gas and electricity is supplied to around 550 developments Rendall & Rittner manages.
The commission rates mean Rendall & Rittner collects £3,000 per gigawatt of electricity and £1,500 per gigawatt of gas. This works out at £546,000 in commission on the electricity and £423,000 in commission on the gas, a total of £969,000 a year.
A gigawatt of power is equivalent to 1 million units of gas or electricity. A gigawatt is enough power to boil around 330,000 kettles for an hour.
This gas and electricity is from the mains supply. These supplies heat and power communal spaces, run lifts, heat communal boilers and light communal paths and car parks.
According to its most recent accounts, in the year to 30 June 2020 Rendall & Rittner took in over £21 million in management fees. In the same year Rendall & Rittner also claimed over £660,000 under the government’s furlough scheme.
The gas and electricity regulator OFGEM deems gas and electricity supplies of this nature to be commercial supplies, meaning they are outside the government’s recently announced domestic price caps for gas and electricity. The new price caps are due to apply from 1 October 2022.
Commercial gas and electricity supplies are often arranged by brokers. The power companies pay commission, and sometimes introduction fees, to secure the business of these brokers. The cost is passed on as part of the unit price charged by the power supplier to end consumer.
The government has said that it will cap commercial electricity supplies to £211 per megawatt hour for electricity and £75 per megawatt hour for gas. This is equivalent to £211,000 per gigawatt hour of electricity and £75,000 per gigawatt hour of gas. The caps are to last at least six months between 1 October 2022 and 31 March 2023.
The capped commercial gas and electricity prices are roughly 4 times higher than they were in 2021. Prices have risen as a result of the Ukraine conflict. The recent slump in the value of the pound against the dollar is likely to further push up prices. Gas and oil are typically priced in US dollars, becoming more expensive as a result.
Wholesale electricity prices in the UK market are set by auction and at the cost of the most expensive supplier, usually gas. As gas prices have risen this has forced up the cost of electricity.
It is currently unclear how the governments proposed cap will be applied to communal gas and electricity supplies in leasehold blocks. The bills are paid by managing agents like Rendall & Rittner using service charge funds. Leaseholders often have to fight tooth-and-nail to be able to even see the invoices.
Rendall & Rittner claims this commission covers its costs of procuring the supply. At the average national salary of £38,000 (say £45,000 after employer national insurance and other costs), the commission would employ a full-time team of nearly 22 people.
Other managing agents operate communal heating and power systems in leasehold buildings. These are not connected to the mains supply. A recent press report by Martina Lees in The Sunday Times reports prices for some these systems increasing by 500%.
Communal heat and power systems are outside the price caps imposed by OFGEM on domestic supplies. The government promises that a fund will be set-up to help leaseholders benefit from the recently announced domestic price caps. It is unclear how that fund will work, or when it will start to operate.
The government is proposing to cap the cost of these communal systems in the same way as for mains-supplied domestic electricity. The new protections were expected to come in from 2024 as part of the Energy Bill.
The Energy Bill contained no equivalent proposal to cap the costs of mains communal gas and electricity supplies, potentially leaving consumers facing uncapped price rises and having to keep paying commissions.
Following the election of Liz Truss, press reports say that the government is abandoning the Energy Bill. It is currently unknown how, or when, the promised protection for communal systems will come in.
With prices rising and the government’s growing appetite to stamp out leasehold abuses in insurance, it remains to be seen whether the government will cap mains communal gas and electricity supplies, or whether they will act to ban commissions of this nature.
The electricity commissions are not the only commissions received by Rendall & Rittner. According to its accounts, between 2016 and 2020 Rendall & Rittner received £1.5 million in dividends from its captive insurance company.
The captive, incorporated in Guernsey in 2016, arranges buildings insurance for blocks managed by Rendall & Rittner, at a steady 40% profit margin. According to its most recent accounts, Rendall & Rittner has paid no UK corporation tax on the captive’s profits since 2016.
In 2021, Rendall & Rittner was acquired by a consortium consisting of the Swedish private equity fund Fidelio and family investment company L E Lundbergsforetagen AB. Companies House filings list Erika Martinson as controlling between 25% and 50% of the voting rights in Wexford HoldCo, Rendall & Rittner’s owner. According to Forbes magazine, Ms Martinson is a 14% shareholder in L E Lundbergsforetagen AB and is worth an estimated $1.8 billion.
The price the Swedish consortium paid to buy Rendall & Rittner has not been disclosed. Companies House filings disclose that between March and July 2022 three different legal charges have been secured over Rendall & Rittner’s assets. Legal charges are the corporate equivalent of mortgages. The charge documents mention a syndicated loan arranged by Danske Bank, part of which appears to have been used to provide the money to buy Rendall & Rittner.
The 2020 accounts show Duncan Rendall and Matthew Rittner received £125,000 each in dividends up to 30 June 2020. A company controlled by the Rendall & Rittner executive pension fund received more than £76,000 in rent for a property leased to the Rendall & Rittner group. Both Duncan Rendall and Matt Rittner are beneficiaries of the executive pension fund.
In the year to 2020, the highest paid of the five directors of R&R Residential Management received salary and benefits of more than £214,000, up from more than £183,000 in 2019. It is not clear from the accounts if this salary package was paid to either or both of Duncan Rendall and Matt Rittner, but they were the only two directors of that company until others were appointed on 1 September 2020.
Rendall & Rittner’s explanatory letter to leaseholders is here:
Good morning, I have posted this article on residents app for CBW , and I’ve had a lot of negative comments from a guy call Keith Fryer stating that this information is non legitimate, false, almost “fake news”, and is being used as a distraction. Is this correct?
LikeLiked by 1 person
Hi Billy I think the article is very clearly evidenced with detailed empirical data so there isn’t really any question about it’s veracity
People who have no facts or evidence and cannot make a coherent argument (like Trump or Fryer) just yell ‘fake news’ to distract from their own ignorance.
. Keith Fryer , for Reasons best known to himself feels the need to defend Rendall and rittner at any cost and has made many personal attacks on me on the CBW app. My account on the cbw app was closed by Mr Stephen Thompson the chair of the cbwra simply for saying that right to manage was possible. Mr fryer also seems strongly opposed to right to manage for reasons that are not clear. Basically there are a number of people in cbwra who are not representative of the residents who seemed to to want to defend Rendall and rittner and are strongly opposed to right to manage.
The lack of freedom of speech on the CBW app is a disgrace and is worthy of any Banana Republic.
I would strongly encourage residents not to allow themselves to be bullied by the the likes of Keith fryer or anyone else associated with the cbwra committee. None of the committee have been elected apart from the chair who got 42 per cent of the vote in Jan 2021 .. only 250 people voted out of a population of around 2000. Cbwra has no legitimacy and in my view does not represent the residents of this development
They have just wasted up to £15,000 of residents money on a failed re-tendering of the management contract which they said would be quicker and cheaper than right to manage 🙂
LikeLike
It’s a strange situation where a managing agent that has no ownership or financial interest in the assets insured (how have they even got an insurable interest) can set up a Captive to insure on behalf of owners(?) and retain profits. Surely profits should be redistributed back to the owners given they are the ones paying for the insurance. Any captive should be owned by the Owners(?).
R&R has effectively set up a non-risk bearing vehicle putting that vehicle in the middle of the insurance transaction and skimming the ‘profits’.
I also had a shattered patio window which was glibly refuted as an insurance matter. Now I know why.
LikeLiked by 1 person
Hi Tony it is indeed a very strange arrangement and and the FCA I have recently released a report on this which I will be publishing here and commenting on shortly. Captive insurance companies are not illegal just yet but it looks like the soon will be B4 at least is going to be much much tighter regulation and an obligation on the managing agent to inform residents about these hidden commissions. 40% guaranteed profits for Rendall and rittner.
To the best of my knowledge no blocks at Chelsea Bridge Wharf covered under captive insurance company schemes. I tried to ask questions about this to Richard Daver while on the cbwra committee and was told not to do so, by Mr Thompson.
LikeLike
Further evidence of ”ISSUES” in relation to electricity billing and rendall and Rittner
Electricity overbilling – The Directors identified that Ecotricity, selected by Rendall and Rittner to provide bulk supply to its portfolio including St Benedicts, is seriously overbilling compared to usage from its actual meter readings at contracted prices. We stopped payment, served a contractual breach warning on Rendall and Rittner to rectify the accounting errors concerned and investigated with our accountants. We are now pursuing a formal complaint with Rendall and Rittner that has been escalalated to Director level at the second stage. Other developments using this bulk supply are strongly advised to examine bills carefully to identify any similar overcharging.
https://www.stbentooting.co.uk/
LikeLike
It seems that R and R deny that they receive commission on electricity but this is in conflict with information on their own website. I am happy to give R and R an open invitation to clarify the situation with regard to electricity commissions and to tell me which part of the above article which they consider to be untrue or inaccurate and I am happy to amend if warranted, but not holding my breath.
(**I made this offer to Rendall and Rittner in November 2022 – I have not heard from then at the time of this update in mid-Jan 2023).
LikeLike
Pingback: Rendall and Rittner – the failure of ‘bulk tendering’ of Electricity supply and 40%+ service charge increases | Chelsea Bridge Wharf - Residents' News and Views. Uncensored