Fair untility bills

[Jonathan Copus]

Can anyone give us a steer on what's fair, please?

My wife and I let out three rooms – two doubles and a single – in a property we used to occupy. To save hassle we've kept the CTax and utilities in our name, and charge our tenants a share of the exact amount the council and utility companies charge us – except that we retain one room in the house for our own occasional use, and pay a proportion of the utilities ourselves to reflect this use.

That's fine as long as all the rooms are fully occupied: each of the five tenants pays one-sixth of the bills and we pay one-sixth between us. But now we have a tenant whose wife is going to join him in a few months' time. Should he pay her share of the utilities right from the start? If not, who should?

We have another tenant who wants to rent a double room for single occupancy. Should she pay one person's share of the bills, or two?

And what happens if one of the rooms falls vacant for a while? Do we increase everybody's payments to fill the gap, or just look big and pay up ourselves?

Or should we (while remaining totally transparent about the amount the utility companies etc are charging us) charge our tenants a bit extra each month to put in a 'pot' for filling any gaps? We only have the one rental property, so we can't spread any losses.

Our AST agreement is deliberately vague, and mentions just 'a proportionate contribution' to the bills. My question really is, what do you chaps and chapesses do, and what do you think is fair all round?

Many thanks.

[Preston]

Hi

I'm not sure I fully understand all the complexities of your situation, but it does seem clear to me that you need to aim to simplify things rather than make them more complicated.

First of all some background. You have created what are called variable (as opposed to fixed) service charges. By law, variable service charges must be reasonable and if a tenant wishes to challenge them they can apply to a Leasehold Valuation Tribunal to have them reviewed. This is rare, but it does mean that you need to bear in mind how an LVT might view the situation. It is also quite possible that if you ever want to apply for a court order for rent arrears that the court will refer the service charges to an LVT to decide on their reasonableness before you get your order.

The following comments assume you are letting each room on a standard AST. If that isnt the case, it could have a significant impact on the situation.

So, the first place an LVT will look is the tenancy agreement. Does the tenancy agreement make it clear that the proportionate contribution varies according to the number of rooms that are let and the level of occupancy in each room? Both would be slightly unusual.

If the tenancy agreement doesnt say these things, the you may have difficulty particularly with the suggestion that you want to increase the contribution for rooms which become multi-occupied; it is, after all, still just one tenancy, even though two people are living there, unless of course you grant a new tenancy on new terms each time this happens? Even if the tenant of the multi occupied room agrees to an increase in contribution, what happens when and if the room becomes single occupied again - all the others will face an increase and how will they feel about that?

And even if your tenancy agreement does cover these issues, remember the LVT will still expect the charges to be reasonable. For example, if you choose to keep two of the rooms vacant, would the charges for the remaining tenant shoot up and would this be reasonable? There is no right or wrong answer to this; it may be that fuel costs vary quite closely according to the level of occupancy; or it may be that they dont.

With regard to council tax there could be quite a large difference between the council tax liability with only one or two people in the property compared with full occupancy. At its extreme, if only one of the rooms is occupied could you charge the one remaining tenant the full council tax liability and would you want to? My guess is that even if your tenancy agreement is clear on this particular issue, it may be considered an unfair term; after all, the tenant would effectively be paying tax for parts of the property that they dont occupy?

So, my advice would be to try, if possible, to make things more definite and if you can move towards fixed service charges as you renew your tenancy agreements or relet the rooms. With regard to the council tax, you could work out what your annual council tax bill will be, estimate what your total occupancy is likely to be and include the relevant proportion in the rent at a fixed level. You might lose out a little,or you might gain a little, it depends on how good your calculations are, but it would be quite legitimate for you to take a "conservative" approach to ensure so far as possible full recovery.

With regard to fuel costs, I would tend not favour varying the contribution simply because two people now occupy a room rather than one; why not just set a proportionate contribution for each tenancy and leave it at that? In setting the contribution you could take account of room size, appliances etc if you wished. Provided fuel costs dont vary hugely because of overall occupancy levels, then my guess is that an LVT would regard a proportionate contribution as reasonable. If, however, they vary greatly and so a tenant could end up paying alot more because you choose to keep rooms empty, then I would worry how that would be regarded by an LVT. In the latter case, I would stick with fixed proportions per room, whether occupied or not, and take the risk as landlord on the other rooms. In effect, I would then build in an element to the core rent to cover this risk.

Anyway, sorry this is a very long and boring answer, In summary, my view would be to keep it simple!

Good luck

Preston

[Jonathan Copus]

Thank you so much, Preston, for your very full and perceptive advice. We'll digest it and follow the lines you suggest.

Many thanks again for your time and trouble.

Jonathan

[RedSofa]

Jonathan

Personally I think you are making life difficult for yourself, due to the reasons you have questioned yourself. Your intentions are fantastic, by only wanting to pass on the actual cost to your tenants, but in practicality it will only end up with confusion when you have voids in the other rooms, and potentially conflict between tenants.

Have you thought about charging your rent to include utilities, so there is no way of any confusion or fluctuating bills for the tenants. This is common with multi-let/HMO situations, you know the typical running costs of the house, as you have the historical info, so you can easily calculate this per room per month (using current energy costs). Build in a cushion for voids (based on your current occupancy rates), and any other factors which you may feel necessary to take account of, then set a monthly rate for utilities and council tax, which is added to the rental figure for your per room per month rate. Get it right and you cover all your running costs and your tenants have a fixed monthly charge, irrelevant whether other rooms in the house are occupied or not.

Charging current tenants for voids, on your basis is wholly unfair in my opinion, as this is your problem not theirs. Simplicity is best, and will ensure that you don't lose out and your tenants know their monthly costs in advance.

I have PM'd you with a solution for you to consider.

Regards

Jeremy

[Jonathan Copus]

Many thanks, Jeremy - your advice seems sound to me. At the next opportunity we'll build utility bills into the rent and allow a 'cushion' as you suggest. That does indeed seem the fairest and least problematic approach.

The reason for our previous transparency was partly a desire to be fair, but also because I thought I'd read somewhere that tenants had a legal right to see the bills. However, I can't now re-find this reference, so it may have applied to social landlords in the State of Kentucky, for all I know!

Thank, you, too, for your PM: I'm about to reply by similar means.

All the best

Jonathan

[RedSofa]

No problem, it just is a much better (and fairer) way of making sure that you keep your tenants happy, and also making life easier for you in the process.

I'm glad my suggestion was of use to you, and I wish you all the very best with it .

Regards

Jeremy

[climbinghigh92]

Hi,

if you want to charge fair utility bills then you could get whats called pre paid meters and timers which are cheap and can be installed by an elctrision, please note i am not on about asking you eletric company to change your meter to pre paid just install your own, this can be handy as if you have bedsits the tenent buys cards off you from £1, £5, £10 which are provided by RDL http://www.rdlproducts.com/php/show-product.php?p=103

which can be found online though some peopel just by refurbished ones becouse there cheaper, though in a shard house a timer on items like hair dryers, irons and washing machines, TVs can help lower the bill and can be removed when house is sold on or you decide to move back there and take 20p, 50p and £1 and you set the time limit yourself, http://www.electricmeters.co.uk/prepaid_services.htm and http://www.electricmeters.co.uk/prepaid_timers.htm, have a look though the links might be helpfull but could stop arguments with tenants becouse thay dont have to use thouse services and could make life eser for you.

[Jonathan Copus]

Hi,

if you want to charge fair utility bills then you could get whats called pre paid meters and timers which are cheap and can be installed by an elctrision, please note i am not on about asking you eletric company to change your meter to pre paid just install your own, this can be handy as if you have bedsits the tenent buys cards off you from £1, £5, £10 which are provided by RDL http://www.rdlproducts.com/php/show-product.php?p=103

which can be found online though some peopel just by refurbished ones becouse there cheaper, though in a shard house a timer on items like hair dryers, irons and washing machines, TVs can help lower the bill and can be removed when house is sold on or you decide to move back there and take 20p, 50p and £1 and you set the time limit yourself, http://www.electricmeters.co.uk/prepaid_services.htm and http://www.electricmeters.co.uk/prepaid_timers.htm, have a look though the links might be helpfull but could stop arguments with tenants becouse thay dont have to use thouse services and could make life eser for you.

[Jonathan Copus]

Thanks, Aaron - a great idea for electricity, but I'm not sure how workable it would be with shared utilities like gas (which runs the central heating) - and things like Council Tax are not metered, of course. But many thanks for your suggestion - certainly worth bearing in mind for the future.

All the best

Jonathan

[climbinghigh92]

Thanks, Aaron - a great idea for electricity, but I'm not sure how workable it would be with shared utilities like gas (which runs the central heating) - and things like Council Tax are not metered, of course. But many thanks for your suggestion - certainly worth bearing in mind for the future.

All the best

Jonathan

its very workable by for example placing them on washing macheins and tumble dryas and buying pre paid services such as hair dryers and irons that take coins like 20p, you can get water meters installed but you pay a pruimum on the water its best to build water into the rent same with gas and keep electrisity spearate though pre paid meters in places like bedrooms and the rest gose into the rent you can also get the shower meterd but would piss peopal off aftert inserting 50p every 15 min if you like long showers but for wasing machines, irons and hardryers it would lower the rent a little and alow for increses in bills, you could also get thinks like certain sockets and tvs meterd as well though if you have loads to spend you can cange the boiler to eletric, works same as gas combi with radiator exceopts dose not use gas and starts at £425 and you dont have to re plum the house! theses thinks are more suted to HMO houses in mulitpul ocupancy and timers start from £40 refrubished by profetional comapnys

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Note this topic goes back to 2008!   😄  Why would a landlord or landlady want to save money on energy bills when they are not the ones paying the bills on a rented out property.  😅

Shall we get the Moderator to remove this entry?  Let's have a vote.

[Grampa]

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