Energy tips for landlords

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As a landlord, you’ve got two main options when it comes to the energy bills in your properties:

  • Let your tenants to choose the tariffs and pay the bills.
  • Arrange the energy supply yourself and either charge tenants separately or incorporate the costs in the rent.

It’s not just about making sure your tenants can cover the monthly bills though, you also need to consider how they manage their gas and electricity usage within your property. This means deciding on the type of meter that’s installed, as well the types of energy efficiency measures you want to put in place.

Here are the main things you need to consider as a landlord:

Is a prepayment meter better than a credit meter?

On the face of it, a prepayment meter might seem the best option for rental properties, as tenants simply pay for energy as they use it.

On the downside, prepayment meters are usually one of the most expensive ways to pay for energy – not only are rates often among the highest out there, prepayment customers aren’t able take advantage of cheaper tariffs or discounted payment options, such as Direct Debit.

And while fitting a prepayment meter is a good way to protect yourself from the risk of tenants moving out while in debt with the energy supplier, it’s more cost-effective for tenants if a credit meter is installed.

How to manage your tenants’ energy

If you do opt for a credit meter, there are three options for managing energy:

  1. Incorporate the cost of your tenants’ energy bills in their rent.
  2. Manage energy for your tenants, who then pay their bills directly to you.
  3. Allow your tenants to manage energy themselves, and pay their bills directly to the suppliers.

It is important to specify in your tenancy agreement which option you’ve chosen, as this can help to prevent any future disputes over the energy bill.

The first two options will require you to:

  • Set up an energy account in your name for your rental property.
  • Work out how much your tenant should pay for their energy usage.
  • Incorporate this cost into your tenant’s rent, or create a bill for your tenant to pay.

When working out how much to charge your tenant for gas and electricity, remember it’s against the law to charge them anything over what you are paying to the supplier.

If multiple, individual tenants live in your property – if you own a student house, for instance - you’ll need to figure out how to charge each tenant fairly and proportionally for their energy. You’ll also need to keep these calculations up to date and ready to show your tenant if they ask for it. You can find out more in this Ofgem guide.

You also need to be aware that ultimate responsibility for the bills lies with the person whose name is on the bills – if it’s your name on the bills and your tenants leave owing money to the energy company, you may well be liable to cover the cost.

The third option hands over to the tenant the responsibility for comparing gas and electricity tariffs and switching supplier. If you want to keep a handle on who supplies energy to your property, you could include a clause in the tenancy agreement that the tenant has to let you know if they want to switch tariffs or suppliers.

If you have a relationship or tie-in with a specific energy provider, you’ll need to specify this – and give your tenant the details of your arrangement.

To help make sure your tenants don’t end up paying for the previous tenants’ energy use, take meter readings as soon as the previous tenants move out, and again when the new ones move in. Then give these readings to each tenant to minimise any disagreements about energy usage.

If your tenants are looking after the energy bills, you can help them by sending these readings to the supplier along with details of the change of tenancy. The supplier can then make sure they are charging the correct tenant for energy at the property.

Tips on energy efficiency for landlords

If your rental property isn’t energy efficient, not only could your tenants be paying more for energy than they should be, it could be banned from the private rental market if it doesn’t meet minimum efficiency standards.

Energy efficiency ratings run from A (highly efficient) to G (least efficient), and if your property is rated anywhere below E, it will be struck off.

And, under the terms of the Energy Act, you can’t refuse a tenant’s reasonable request for energy efficiency improvements at their home, as long as a financial package is available for that improvement. Typical requests include:

  • Loft and cavity wall insulation
  • Solid wall insulation
  • Upgrading boiler/heating controls
  • Draught proofing
  • Double/triple glazing

As well as keeping your property on the rental market, and making sure your tenants live in comfortable conditions, other benefits of having an energy efficient property include:

  • A potential increase in the value of your property, which could make it more appealing to prospective tenants, and reduce the turnover of tenants.
  • Tenants are less likely to go into rent arrears or fuel poverty, as energy bills will be lower.
  • Less risk of condensation and damp at the property, meaning fewer repairs need to be carried out.
  • Higher Energy Performance Certificate (EPC) ratings which might make your property easier to let.

What are your safety responsibilities as a landlord?

As a landlord, you are responsible for making sure any properties you own are safe to live in and free from health hazards, including, but not exclusive to:

  • Regularly inspecting sockets and light fittings to make sure they’re safe.
  • Carrying out regular check on electrical appliances and keep electrical safety certificates up to date.
  • Making sure gas equipment is safely installed and maintained by a Gas Safe registered engineer. A registered engineer should then carry out gas safety checks each year, or between changes in tenancy.
  • Every tenant should be given a copy of the gas safety check record before they move in, or within 28 days of the check.
  • Always follow fire safety regulations by making sure furniture and furnishings are fire safe, and fire alarms, blankets, and extinguishers are fitted. If the property is a large House in Multiple Occupation (HMO), providing fire alarms and extinguishers.

What financial support is available for landlords?

If you need to improve energy efficiency at your property or install renewable energy technology, such as solar panels, there are grants and schemes available to help cover the costs, including:

Green Deal

The Green Deal is designed to help you make energy-saving improvements to your home, and cover the cost through savings on your electricity bill.

The improvements that could save you the most energy depend on your home, but typical examples include:

As the scheme applies to the electricity meter at the property, each subsequent tenant will continue the repayments, which means you’ll need to let tenants know that your property is signed up to the Green Deal. Likewise, if your tenants wish to sign up to the Green Deal, they’ll need to get your permission.

Find out more at GOV.UK

Energy Company Obligation (ECO)

This is a government energy efficiency scheme designed to help reduce carbon emissions and help fight fuel poverty. Aimed at lower-income and vulnerable households, the scheme helps with the installation of energy-efficiency measures not covered under the Green Deal, such as hard-to-treat cavity walls, draught proofing and new boilers.

Find out more at Ofgem.

Domestic Renewable Heat Incentive (RHI)

If your property is eligible for this scheme, you’ll benefit from quarterly payments over a seven year period to help cover the costs of installing renewable heat technology. The amount you get depends on the type of technology you install, as well as the latest tariffs available for each technology and metering.

Read more on this scheme at Ofgem.

Feed-In Tariffs (FITs)

Once you’ve fitted install renewable or low-carbon electricity-generating technology, you should be eligible for feed-in payments from suppliers, who will pay a set rate for each unit (kWh) of electricity you generate and a further rate for each unit you export back to the electricity grid. As well as making money, you’ll also save money on electricity bills because you, or your tenant, won’t have to buy as much electricity from the supplier.

Find out more at our guide to the feed-in tariff scheme.

Enhanced Capital Allowance (ECA)

If you if you pay corporation tax, or own a large portfolio of properties, this scheme allows you to claim 100% of the tax back on any eligible energy saving technologies you’ve invested in.

Find out more at GOV.UK.

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