Options for changing existing rental arrangements – energy costs problem

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    Options for changing existing rental arrangements – energy costs problem

    Hi all, a bit of a long one from a forum newcomer. Any insights and suggestions would be welcomed. Three years ago I more or less came into possession of an aging semi, converted into five studios & one bedders. Rents are decent, repairs costs a bit high, I have been focused on refurbing units as opportunity presents and getting the place in a better condition to lower expenses and improve the offering. I am often overseas and, as the COVID drama started, had to leave overseas for work & other reasons in March 2020. I left the day to day dealings with the property, repairs etc. in the hands of a friend, not a professional, who is good on the fixings side, not so good on the management of the property. As I say, an old property with smith coin meters, and a gas boiler providing central heating for many years, the supply of gas paid for by the owner.

    I've watched as the spiraling fuel price situation has unfolded over the past 6+ months. There are two major issues at the property - the first was that the gent managing the place was unable to update/adjust the electricity rates on the coin meters on a regular basis, despite my requests to do so etc. This resulted in me paying more for electricity than the tenants were paying for it, and owing monies to the provider as a result. I've now installed smart ie topup meters in each unit, so that situation should be corrected/improved going forward. The remaining major problem is the central heating - obviously as gas prices leap 50+% each six months with the cap, my exposure to this pricing is and will continue to increase. The fact that until I returned to the country a few weeks ago the gas central heating was still on on very warm days didn't help. Along with the debt I owe that was generated due to the electricity pricing problem I mention above, the gas pricing means I am facing these costs making the property completely unviable, and eating up any profitability at all. Not including Octobers forthcoming price increases, I am facing payments to the provider of between £624-916 per month, a small part of which will be offset by funds collected from the updated electricity meters, but the bulk of which relates or will relate to the gas central heating. Energy costs could comprise more than a third or half of gross annual rent, potentially. This is completely unsustainable as I see things. I see my options as;

    Disconnect the gas, and install electric panel heaters into each unit, the running costs of which will need to be borne by tenants via meters. There are obviously going to be problems with this, the AST's on each unit do not specify that I pay for the central heating, but this change will clearly have a huge impact on the tenants costs. Am I exposed to legal challenge on doing this ? As some sort of breach of implicit terms or contract under UK tenancy legislation? Are there other, ie EPC, or regulatory impacts?

    A follow on is, If legals etc. are an issue or the above is not possible due to other impediments, issue Section 21 notices, vacate the units, close the place down completely, install panel heaters and ultimately relet the property.

    Attempt to negotiate an arrangement whereby tenants share the costs of the gas central heating based on a calculation etc. Aside from the fact I see this as being unlikely to be agreed to, obviously there are all sorts of issues with this, from enforceability and legal application.

    Have an electric boiler installed to replace the gas, and continue paying for central heating myself. The distance from the meter to the boiler is large, so install and costs for this would be significant, but above all, I don't really see how this would change the fundamentals, I would still be paying for other peoples heating, and have almost unlimited exposure to price.

    Any views,advice etc. of a helpful nature would be most gratefully received - incidentally, as I have mentioned, this older property and the arrangements for heating basically were 'inherited' so to speak, and I am aware that my inattention to dealing with what was an outmoded arrangement has led to this problem - it is basically my fault - I have major family and work responsibilities overseas, and just have taken my eye off the ball and let this situation evolve into one that I see as threatening the viability of renting the property out altogether.

    #2
    What exactly do these tenancy agreements say with regards to central heating and gas usage?

    Currently the EPC for any AST in England entered into from 1st April 2020 has to meet at least an E rating. What rating do the studios and 1-bedroom (flats?) currently have and when do you need to renew the EPC?

    If I was removing a gas central heating system then providing the property is adequately insulated, or can be insulated, I'd potentially be looking at installing a heat pump(s). If that's not an option then I believe night storage heaters score better on an EPC than electric panel heaters. Storage heaters would be cheaper for the tenants too if the top-up meters can support an Economy 7 tariff.

    Speaking as someone who has been an overseas landlord I don't think I would ever let a property from so far away ever again. You would need to find a good letting agent who could manage the property for you but thus far my experiences with letting agencies, both as a landlord and a tenants have been rather meh.

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      #3
      As things stand, replacing gch with electric panel radiators will screw your epc. In an old property it could make it legally unlettable.

      If your tenancies include energy within the rental cost then you cant unilaterally alter the arrangement. I suspect your only realistic option is to increase the rent.

      Comment


        #4
        Thanks for the responses, DoricPixie & DPT57. Late responding, fibre cable problems. The AST's - All but one are silent on central heating and gas usage. One states 'the landlord is responsible for payment of utilities inc. natural gas' as an incidental, but does not mention provision of central heating. The EPC situation is..not great;

        Flat 1 studio is D issued 2018
        Flat 2 1B is E issued 2012
        Flat 3 1B is E issued 2008
        Flat 4 1B is D issued 2018
        Flat 5 1B is E issued 2008


        I do fear the impact any change like, say, panel heaters would have in degrading the EPC rating, and would be the wrong direction to be going in, 2025 C ratings etc.

        I agree with you on distance letting, normally I would have used an agent, particularly given the fact I was stuck overseas for an extended period when the various restrictions came in, but likewise with agents managing, with a couple of high-end notable experiences, they have never really had good results for me, and have often added complications for all parties.

        The rents have been increased, but rent increases that keep pace with bi-annual doubling of gas costs are not going to be feasible, and would still leave exposure to never ending energy prcie increases.

        This is starting to look like an even bigger problem than I first thought, it may be time for a major rethink on this property as currently set up.



        Comment


          #5
          Many (probably most) HMO landlords are in a similar situation. I think that realistically the only thing that you can do is absorb the extra costs until you can next increase the rent or change the contract.

          Comment


            #6
            Yes - although the AST's don't commit me to paying for the central heating, I don't think the panel heater avenue would work beyond the short term, and I then have a major problem with the EPC points going forward. Gas is off now, rents are increased as at 1/8, giving me a little breathing space while I find a longer term solution. Thanks for the sage advice.

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              #7
              If you've been paying it up to now then it's part of the conditions of the tenancy regardless of what the contract says.

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