How to reduce costs in first HMO?

Hi Jake

Although Hive allows you to monitor and control the central heating remotely, I believe it is designed for homeowners, and as such it can be overridden by the residents on site. - Unless the spec has changed since I looked at this? Because of this ability for residents to change the settings, I now use the landlord specific remote central heating controllers made by Inspire Home Automation, as these can be "locked" so as to stop the settings being changed by residents.

In relation to other costs, I simply charge a set weekly amount as a "service charge" which is the resident's contribution to the running costs of the property, e.g. gas, electricity, water, council tax, etc, etc. This way, everyone knows what amount is expected from them and they can budget for this accordingly.

Robert - the fear of many HMO landlords, or landlords offering "bills inclusive" (whether or not the bills are included in the rent or itemised as a compulsory service charge), is that tenants will regard energy and water as basically free once they've paid: everyone pays the same amount and there is no incentive to economise on lighting or water use. The landlord is left paying up if the tenants are inclined to be profligate, as the service charge will be insufficient to cover the bills. How do you deal with this scenario under your arrangement? I appreciate your heating controls cover a significant proportion of the risk, though I'm not sure how my tenants would respond to the lack of control if they regularly feel too cold or too hot in the house.

As regards Jake's query, I'm afraid I find it a bit sad that he feels the need to control his tenants' use of the washing machine and tumble drier to such a degree. Are you running a laundrette in this HMO, or trying to provide a welcoming home-like environment where tenants might conceivably talk to each other and are inclined to stay for as long as possible, so reducing your workload? Washing machines come with in-built cycles, which don't break down into convenient 30 minute or 60 minute units; also, where, really, is the potential loss to you if you don't operate a timer? For every Daisy who insists on washing clothes once a day, there will be a Boris who only washes once every 3 weeks when he's down to his last pair of socks or having to re-wear his underpants from last week. Wouldn't it be better and make for a happier, less hotel-like house, if the washing machine is free to use, with the tenants charged collectively for their estimated water and electricity use over a year? There's less work for you, emptying and handling all that loose change in the money boxes, and if you undercharge in Year 1, you can always revise the service charge in Year 2.

Reply to the comment left by "Tony Atkins" at "18/01/2016 - 12:14":

Hi Tony

Yes, the residents do treat the utilities as free so will waste as much of it as possible. However, in my HMOs the residents are usually unemployed or in zero hour agency contracts, and they do not all come in to the property together and take joint responsibility, (like they may do in student accommodation), so there is no other way of doing it. If it was a case of just putting the bills into their joint names and leave them to pay for it, then the bills would not get paid because some would be willing to pay their share but others would not. This would result in disconnections, and I would lose the good tenants from the property (as well as the bad ones), so this would not make good business sense.

In relation to the tenant's personal lack of control over the heating, the heating is set to come on when they want it to come on (i.e. I ask them what time they want it set for), and I set it above 20 degrees, and they have TRVs on the radiators so can control their individual room temperature. However, what the Inspire system does do is prevent the tenants from setting the heating at 35 degrees while leaving all the doors and windows open or while going on holiday (which is what tenants did before I had these installed). Yes, it limits their control to that which is reasonable.

I do not charge any extra for each occasion my residents use the washing machine or tumble drier, so I agree that this is perhaps a bit sad that Jake feels the need to do this, but this is his choice. However, it could put off some potential residents, so could lead to increased void periods and end up costing Jake more money rather than saving him money. It also creates a store of money in the house (the coin meters), which would be an extremely tempting target for theft, and the damage done in breaking in to the coin meter will end up costing Jake much more than the amount he collects from the meter. - Personally, I think this is a very bad idea.

I have no experience of running or living in an HMO, but my mother lives in sheltered housing for elderly people, which has a shared launderette with two washing machines and one tumble dryer shared between approximately 100 residents. Access to the launderette is normally only allowed during the day on working days.

As there is no warden or manager onsite, the landlords delegate some management duties to certain tenants, including management of the launderette. Unfortunately, tenants often squabble over access to the launderette, and I'm afraid this especially includes the "manager" tenant. On one occasion, it nearly came to blows between the "manager" and another tenant while my mother was using the launderette!

We have a few HMOs with professional tenants and just have coin meters on the tumble dryers, but not on anything else. They were actually rather expensive to buy and install and we are not sure if it was actually worth it.

We have a clause in our tenancy agreements which says that if the bills exceed a certain amount then the excess will be split equally amongst all the tenants. The bills have never come anywhere close to that amount - if they did we would point this out to the tenants.
I am not sure how difficult it would be to collect any overspend, but it just makes the tenants aware that they should be considerate when using gas/electricity. This system works well for us.
I think the best way to control your costs is by being honest with your tenants and keeping them on your side.

Thank you for all your comments they have been very much appreciated and I will take them on board. The Inspire Landlord thermostat is certainly a good alternative to the Hive so thank you Robert for that recommendation.

Hi Robert - utility bills are of course a topic of perpetual debate amongst HMO landlords. My approach is that all the bills and council tax are in my name, so there's no risk of a tenant failing to pay and creating arrears, and there's none of those "time for everyone to cough up" debates every time a bill arrives. There's no landline because everyone has a mobile phone, which again saves any aggro over who made what call on the shared phone. Of course there is some extra work for me in reading the meters and calculating the invoices, but it's not too bad.

I read the meters and issue an invoice once a month or so, charging the tenants for what they've used since the last invoice. The council tax and internet subscription are obviously a standard rate per day, and the bills rise in the winter months and fall in the summer. Issuing an invoice every month makes it hard for the tenants - all of whom are working - to complain that "it's a big unexpected bill and I can't afford to pay". They've all paid up without complaint for eight years now, except for one tenant who insisted on having a fixed monthly amount to pay, to give him consistent known outgoings, which simply demonstrated he was probably going to be a problematic tenant who didn't know how to budget - and so it proved.

My approach means the houseshare/HMO tenants retain responsibility for the size of their bills, and have to learn to negotiate issues like the average warmth of the house between themselves. There are TRVs as well in every room so there is some scope for them to vary their individual room temperatures. The main debate seems to be about what time the heating goes on and off. Also, one tenant works from home for part of the week, so he needs the heating on when the others are out, but I believe they've worked out a compromise so that he's allowed to have the heating on more, in exchange for more cleaning duties and agreeing to take out a larger internet and TV package than he was originally willing to have.

We include all bills and leave the timer set for 17 hours per day. On at 5am, off at 10pm. Correct me if I'm wrong but I was of the belief that you are not allowed to take control of the settings out of tenants' hands. If they were to want it on 24 hours then they are able to do that. If they leave it on when on holiday then that is fine. They've already paid their rent. My bottom line is to charge a high enough rent to cover all eventualities and my tenants love just having one bill and I just love knowing how much profit I will make each month regardless of their profligacy. In the summer we make an increased profit as we don't lower their rent. For every wasteful tenant, there is one that spends half of the week elsewhere.