It’s not just the Utility Costs

It’s not just the Utility costs…..

Many HMO operators and serviced accommodation providers who include utility bills within their quoted rent levels have already seen their business models change as a consequence of soaring utility bills and indeed these costs are set to increase even further with a revised pricing cap and the onset of the colder weather in the Autumn..

Lenders may become concerned at the profitability of such “all inclusive” room rate ventures and funding these types of investments could potentially become more difficult. Indeed, such issues could be compounded further by increasing interest rates.

I suggest you review your business model and consider whether any change and or diversification could potentially reduce your level of exposure.

In addition, I have concerns about how potentially enormous utility bills could affect the wider rental market.

There could doubtless be an affordability issue wherein tenants will struggle to meet the obligations of the utility provider and the landlord. Some proactive discussions, perhaps along similar lines as you undertook during the furlough scheme will doubtless be necessary.

For those who have outsourced their property to a rent-to-rent operator you may wish to obtain confirmation that the utility bills are being met on an ongoing basis. You would not wish to have the property returned to you at the end of the agreement only to find thousands of pounds of unpaid utility bills.

For those who deal with their tenants directly, I urge landlords to take a pragmatic view during this rather unprecedented time. It is not the fault of your tenant that they are potentially financially stretched and indeed it is unlikely to be a permanent situation. A revision of pricing or government intervention is likely to mean this is a short to medium term situation. Being able to navigate this time by extending some flexibility should hopefully mitigate any loss and enable you to avoid the costs of a void.

Considering the situation in more detail I have concerns that some tenants may attempt to mitigate their utility costs by implementing more creative strategies. We may see more people trying to bypass their gas or electricity meters and these actions, as well as being illegal, generally have considerable health and safety implications for your Building and your tenants.  It is something that as a Managing Agent I witnessed probably about once a year. I think this could increase.

Accordingly I suggest that you maintain or implement a regime of property inspections and be alert to this type of unauthorized alteration to the property. A bypassed electricity meter is generally easy to spot as the lower section of the front cover will have been removed and an additional cable installed. The more eagle eyed will also notice that the metal security tags have been removed from the meter cover.

In respect of gas, be alert to a meter that is at an angle or has otherwise been removed from its mounting. If you spot anything you are uncomfortable with then you must call the appropriate emergency safety lines at the utility provider.

For those unwilling to break the law there could be some breaches of tenancy as tenants perhaps consider the use of calor gas heating within properties. This is a significant concern not only due to the fact that it will likely invalidate your building insurance policy but also their use will significantly increase the level of condensation within the property as well as the risk of fire.

Regular checks on your property will ensure that you can better manage any new risks. People are generally quite ingenious. I once saw a clothes drying rail positioned above a gas hob. Certainly they may have saved some money by not using a tumble drier but the risk of a fire in such circumstances is enormous.

The proactive amongst you could provide you tenants with an information sheet perhaps promoting some energy saving measures which could assist through these challenging times. Reminding them of the hours where the cheaper night rate electricity may apply or a suggestion to turn down the thermostat for the heating or hot water cylinder could lead to some savings.

And perhaps Landlords should start to see whether it is worthwhile to consider the installation of a solar PV system for electricity generation or a solar thermal system to assist with hot water.  As long as utility prices remain expensive, properties with such energy saving measures are likely to be in huge demand and could attract a higher rent than those without.

As always, we need to adapt to change within our business and as usual, those who embrace change and seek to accommodate it will likely be the best positioned to weather this particular storm.