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9:46 AM, 28th February 2024, About 2 months ago 25
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Hi there, we (my partner and I) are first-time landlords and tried to bite more than what we can chew by investing in an HMO buy-to-let investment. We soon realised that we aimed to dance before we could crawl or walk with the mounting admin work and huge bills to cater to, hence appreciate all the expert advice we can get on this forum, many thanks in advance.
This is a 6 bed two bath property let out room by room with rent per month including bills. The contract states a fair usage policy for the bills being £3000 per annum. The contract also states no use of electric/portable heaters.
During our inspection, we noticed electric fan heaters being used. Now the bills for gas and electricity have gone up to three times the allowed fair usage amount per month (if calculated pro rata basis). Estate agents have sent out emails on the excess usage and about the portable heaters. All the tenants claim they are not using excess and do not want to contribute to the excess.
We have also mentioned that we are willing to increase the fair usage considering the rising energy bills and want it to be fair for the tenants and the landlord and calculate accordingly. One tenant has put a fridge freezer in her room (the kitchen we provided already has all the white goods) which she may be within her rights to put it but denying usage of excess energy and not willing to contribute didn’t seem fair.
We recently had an HMO licence inspection and tenants were given notice and informed about the visit. On the inspection day, one tenant’s room was blasting hot with an electric heater on (probably all through the night) and him sleeping with the TV on in loud sound. He couldn’t hear us knocking several times and them opening the door with our key for council officers to view the room. The council officer was worried the tenant would suffocate with that heat which was around 35C and asked another tenant to switch off the heater.
We have calculated the excess based on their contract start date and the energy consumption per day as we have a smart meter, allowed 20% extra of the fair usage and then calculated for past four months and sent them to estate agent. Initially the estate agent was reluctant to send this to tenants saying we have to claim this from their deposits at their end of term when they vacate. After showing how soon they all will exceed the deposit amount with the alarming gas and electric usage, the estate agent was convinced and sent the calculations to tenants. Now the agent says the tenants all dispute the usage and do not give me further details.
Past – I do have contact number of one tenant (Room 5) whose number I had to take for ordering a new vacuum cleaner when old one was reported as not working. Since then another tenant (Room 1) took my number from the other tenant and contacted once that heating was not working. I asked them to report to agents and that was sorted immediately.
Present – Room 1 tenant messaged me saying that he got a call from agents about the excess usage and was asking all the details of what is included in bills etc and I politely explained to him about the council tax , water, broadband, communal cleaning and gas and electric bills. I also told him how properties in the same street are available for the same rent but excluding bills while we are providing including bills and about the fair usage.
I also told him that we incur huge mortgage, estate agent fees and also building insurance etc hence it is not fair on us too to bear the excess which has to be shared by all tenants. First he said he has no option but to pay up. Few days later he messages saying he won’t pay until we show evidence that he is using that from his room alone. I did not like his way of talk and politely said that we would communicate via the estate agent only from now on. Feel like this is going to stir up a lot of debate among tenants and everyone following the same stance stating they won’t pay up.
We cannot show evidence room by room as it is not sub metered and it is a shared accommodation. I shared all bills and calculations to the estate agents and tenants. It was a tedious effort to calculate on a spreadsheet room by room based on their contract start date and amount they owe us. I am thinking of asking the estate agent to send a written statement from tenants whether they are willing to pay or not.
My question now is, any advice on what is the best way to approach this situation now and going forward. Tenant from Room 1 contract ends in a month and half, hence would it be best we give notice and inform that the excess bills usage would be deducted from deposit. We are willing to be more generous in fair usage limit (apart from the 20% we already gave) if the tenants are willing to pay up only.
Is it good idea to communicate this via the estate agents? I sense that estate agents feel this is too much of work for them to deal with and they simply say that most landlords absorb the excess costs as a part of their portfolio. For us this is the only property and we put all our savings in it (clearly a bad idea now in hindsight). How can I work this out with estate agents so they work in a positive way for us. This property is fully managed by the estate agents.
As a long term solution we do want to sell up as soon as possible at least for breakeven price but current property market wouldn’t help due to negative equity. Hence we have to wait at least two years. Previous tenants (stayed for 9 months) paid up all excess duly and it was a company let agreement then. Since they vacated, we let it out room by room and the troubles started.
Please let me know if I am doing anything wrong here expecting the excess to be paid duly. What are my options here in recovering the excess bills? Can I issue a Statutory Demand for the amount after few more gentle reminders. Should I just accept the unfairness despite having a fair usage policy on contract which I can’t use. What would be best way to deal with this situation.
Kind regards,
YB
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Harlequin
11:08 AM, 28th February 2024, About 2 months ago
Long time, old fashioned HMO owner - long before HMO was a 'thing' - if anything is open ended it will be totally abused. Now we have significant unit charge for energy it is very hard to keep in check - I moved mine to key (or card now) meters years ago. I give them an allowance on it per month and they pay over. Gas didn't work because it kept running out and the boiler kept going out - so the heating is on timed for morning and evening - a mid day during winter and weekends, if they want to put a heater on they can - and obviously they pay for it. This example is one I sold end of last year - it is getting harder and harder for HMOs with all the paperwork, fire risk assessments - endless. The end came when they wanted all fire doors - having been happy with them for the last 15 years, would have been around £40k - wipe out any profit for the year - so 9 people back out in the market at the highest time it's been in living memory. I don't know what our government is thinking - but another story.
Tenants will not hold back - you need to manage it.
I have some flats in a block with 24/7 heating and hot water included (I've no choice) - tenants wander around barefoot and t shirts opening the window to manage the heat - because I pay for it in my service charge - and because they can, all I can do is increase the rent every 6 months to cover it.
Jo Westlake
11:14 AM, 28th February 2024, About 2 months ago
£3000 seems to be an incredibly low limit for a 6 person HMO, especially if it includes Council Tax.
My 6 person HMO has so far used in this tax year (11 months):
Gas £975
Electric £1798
Water £1035
Broadband and TV license £529
Council Tax £2167 (12 months).
So that's over £6500 so far with at least another £600 for next month.
Compared with my other smaller HMOs those bills don't seem in any way excessive for 6 people. Gas and water are very much in line. Electric only seems expensive because that house doesn't have solar panels and most of the tenants cook proper food every day. The actual kWh consumption per person isn't out of line with other per person consumption.
Bills are expensive and using a monetary fair usage limit is problematic. A kWh based policy is probably more realistic but incredibly hard to enforce in an HMO. You could sub meter each room but then the tenants would just run an extension cable from a communal socket.
I've always found setting the gas central heating to a comfortable temperature minimises use of electric heaters. There are some very good central heating programmers specifically designed for the HMO market that allow you to monitor and adjust the heating from your phone. Tenants can boost it for 1 or 2 hours whenever they want but they can't reprogram it.
BTL Landlord
11:39 AM, 28th February 2024, About 2 months ago
Jo would you by any chance know the name of the central heating programmer please I have a similar issue to YB who has posted this thread Thank you
David Meale
11:43 AM, 28th February 2024, About 2 months ago
Hi I had similar issues, I included all bills, as you've found the tenants all buy electric fires, as they're up all night when the central heatings off, basically I separately wired each bedsit and put a token meter in each flat, sorted it St away. Allowing them cart blance may result in melted sockets, fires anything, I'm afraid they totally abuse you, separate meters is the only way.
Cider Drinker
11:58 AM, 28th February 2024, About 2 months ago
Add up your costs, add your desired profit and risk margins, divide by 6. New rent sorted.
Maybe refund some of the new rent if bills come in lower than planned over the course of a year.
YB
12:04 PM, 28th February 2024, About 2 months ago
Reply to the comment left by Jo Westlake at 28/02/2024 - 11:14Apologies £3000 per annum is only for Gas and Electric. Fair usage policy is only for Gas and electric and for £3000 per annum which is about the same you have suggested. We are still paying extra for Broadband , Council Tax Water and communal cleaning which is not included in Fair usage policy .
Many thanks for your suggestions , will have to look into the options . Looks like we need to invest more to get things sorted . Any chance you could suggest some thermostats suitable for HMO that can be monitored and the sub meters that you used ? Thank you
YB
12:13 PM, 28th February 2024, About 2 months ago
Reply to the comment left by Harlequin at 28/02/2024 - 11:08Thank you for your reply Harlequin.
Estate agents says that rent can only be increased once per annum. Also the area is very competitive and if there are other rooms let for less with ensuite it is hard to compete .
The rent we will have to charge per room adding to expenses (with two shared bathrooms ) will be same as ensuite rooms. So wondering if we would have any prospective tenants at all that way or would we be drowned in void periods .
Newbie trying to learn many things at once in the world of HMO.
YB
12:14 PM, 28th February 2024, About 2 months ago
Reply to the comment left by David Meale at 28/02/2024 - 11:43
Thanks David. Any suggestions on the sub meters you used and worked best ?
Harlequin
12:31 PM, 28th February 2024, About 2 months ago
Reply to the comment left by YB at 28/02/2024 - 12:13
I never call it a rent rise - it is a rise to take in the increased costs rent stays the same, if I give a 6 month contract it can either be the end of tenancy and goodbye or a new contract with a different rent - to be fair to me it is only in recently I've had to do this annually I did keep rents the same whilst tenants were in place but the whole market has changed - the key meter once bedded in (about 15 years ago) sorted out the electrics, depends on the sharers, some respect it and some put on the oven for one baked potato and dishwasher for a couple of plates and a spoon. I spoke to my EH guy at the council as I had one tenant complaining about the cold when the timed heating went off and he was fine with it - said if they had an alternative source there was no problem. There is always one.....
Meters in rooms is a tricky one - do you provide the coins? sounds an expensive fix unless it is a coin meter. Also be wary of making the rooms too self contained as it could tip you into separate council tax for the rooms - I think there is something 'afoot' at the moment.
YB
13:05 PM, 28th February 2024, About 2 months ago
Reply to the comment left by Harlequin at 28/02/2024 - 12:31Many thanks Harlequin , I understand now. The terminology is key , rent rise versus keeping up with costs and fair usage and issuing new contracts at the end of term etc. Having the Council in loop is nice to cover our bases . I will be looking into the key meters in room . Any suggestions on key meters that you have used that are tried , tested and happy with ?
Regards
YB