One of the decisions an HMO landlord must make is whether to include utility bills, such as electricity, gas, water and other services, within the monthly rental charge for tenants. The complexity of trying to split bills between multiple occupiers, or how to balance the books when one tenant leaves, means that many HMO landlords will choose the all-inclusive option. Tenants may also prefer its simplicity.
The challenges of an all-inclusive rent
However, an all-inclusive rental policy can bring its own challenges since it doesn’t directly encourage responsible energy usage by tenants. Yet for landlords, continued energy price rises make energy efficiency a priority to keep overall costs down. The last energy price cap review, announced in August, resulted in a 2% increase in the average cost of energy from 1 October to 31 December.
In the shared environment of the HMO, tenants may not have the same energy-efficient habits – especially when they aren’t directly paying the utility bills. One might live in a hoodie and tracksuit, rarely turning their heating up, while another lives in shorts and a t-shirt with their heating blazing.
Judging how to budget for utility costs is essential to your profitability as a landlord. There are several ways of handling the variability of such bills.
Fair usage clauses
One way to ensure you aren’t left out of pocket is by including fair usage clauses as part of the tenancy agreement. This will impose an energy usage cap on tenants, beyond which they will be required to pay extra.
This accountability can encourage more responsible energy usage since tenants will end up paying for excessive use. You should ensure such clauses are fair and legal and have been agreed to by your HMO tenants.
Using technology to control energy usage
However, fair usage clauses require time and effort to police. Another option is to consider technology to better control energy usage. The installation of smart thermostats can help to both monitor and reduce energy usage, for example.
Systems such as Inspire or Time:O:Stat are specifically designed for HMO landlords. Inspire claims most landlords using its system save more than £400 a year on their energy bills, while Time:O:Stat claims it can cut heating bills by 40%.
Such systems help to ensure that the heating isn’t left on indefinitely. Only the account holder – usually the landlord or managing agent – can alter settings such as heating times, although boost functions are available to tenants. The smart thermostats can also be paired with other sensors, such as those which recognise when windows are open and turn off the heating in response.
Improving the energy efficiency of an HMO
Ensuring your HMO property is energy-efficient will also help to stop bills from spiralling beyond set thresholds. Many landlords will focus on improving the EPC rating of their HMOs – such as through updated heating systems or improved insulation – to ensure properties better hold the heat. Simple options such as energy efficient lighting controlled by sensors can also help to avoid wasteful use.
We Can Help
At Progressive Lets, we are experts in the rental market in the Peterborough area and in HMO management. Get in touch to find out more.
