HMO utility bills exceeding fair usage policy?

HMO utility bills exceeding fair usage policy?

9:46 AM, 28th February 2024, About 3 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,

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Nigel Thompson

10:28 AM, 2nd March 2024, About 3 months ago

I see 2 options as we had a similar problem 1-look at your annual bills £3,000 seems very light indeed I would of thought it would be more like £6,000 annually then divide by your 6 rooms this figure becomes part of the rent.
2-Put payment card meters for use of electricity in each room this is our preferred option which in the main all our properties now have and has resolved all excessive electricity bills it was a transformation when suddenly each tenant was responsible for what they use.

philip allen

18:08 PM, 2nd March 2024, About 3 months ago

Reply to the comment left by Jo Westlake at 28/02/2024 - 11:14
I would respectfully suggest that the OP could (should?) do two things: 1. Leave the agent to manage as they have a full management agreement, i.e. NO personal contact with tenants and 2. Set their rents to cover all possible eventualities. Difficult? Not now that they know the numbers involved. We have an 8 bed HMO and covered all the massive energy hikes with no need to introduce energy caps. Of course it reduced bottom line profits for a time but, wow, did it create good feedback from our tenants. They didn't think to consider that they had been paying for the extra costs prior to the energy costs 'exploding' The OP should redo all their sums and communicate ONLY with their agent.

philip allen

18:11 PM, 2nd March 2024, About 3 months ago

Reply to the comment left by Cider Drinker at 28/02/2024 - 11:58
Excellent thinking! Our take on it totally.


21:24 PM, 2nd March 2024, About 3 months ago

Reply to the comment left by philip allen at 02/03/2024 - 18:08
Thank you for your inputs Philip Allen . Agree with communication via estate agent only and recalculations now that we know the monthly energy costs , council tax , water and broadband cost as all of these are included in all inclusive rent.
I am working these out with estate agents and they have been very helpful , also advising us based on NRLA guidelines.

Par Zare

10:17 AM, 3rd March 2024, About 3 months ago

We’re paying over £500pcm for gas & electric during winter, this drops in summer time.

The tenants will continue to exploit, a few options to consider:

1. All new tenants do not have bills included
2. Switch all the tenants out for new tenants and vet new tenants.
3. Sell the house at a loss and be done with it
4. Increase rents if possible to cover extra
5. Add electric monitoring per room
6. Add more insulation to the house
7. Switch to single let
8. Get a rent to rent company to manage
9. Use a smart meter and put on display in communal

We’ve got fair usage but never enforced. HMOs are difficult to find who’s using most / causing problems.

Best of luck.

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