ALL inclusive bills nightmare as a Landlord for next academic year

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    ALL inclusive bills nightmare as a Landlord for next academic year

    Hello

    I am a Landlord to HMO students and have fallen foul of the impending enormous price increases in energy which are due soon. I rent all of my student properties ALL inclusive with bills for a fixed cost. This isn't normally a problem, but as my students sign 12months in advance for the next academic year, I haven't been able to foresee the unprecedented massive energy price increases and now the rent I am charging for the next academic year when they move in Sep 2022 is no where near enough to cover the bill costs, i could normaly ebsorb the costs, but the houses are huge 8 bedrooms 4 story buildings and im looking at bills going up from about £325 to over £800 a month!

    I have tried to talk to the students and explain that I need to increase the rent to cover my costs, but they are playing hardball saying they have signed a fixed price contract.

    Can I cancel the contract and re advertise the property as I think they are being wholly unreasonable given the circumstances on the national energy crisis.

    They haven't moved into the property and their contract says it doesn't start until 1st September, however they have signed and paid a deposit.

    What are my options in this scenario?

    #2
    So each house is not even yielding £475 profit per month? I think you set the rent too low in the first place.
    To save them chiming in, JPKeates, Theartfullodger, Boletus, Mindthegap, Macromia, Holy Cow & Ted.E.Bear think the opposite of me on almost every subject.

    Comment


      #3
      No not at all, but its a significant dent in my profits per house and I want to mitigate it. I want advice on what my options are to cancel the original agreement as its no longer tenable given the world scenario of energy has changed and also they are not moving in for another 6months!

      Comment


        #4
        It's, sorry, part of the risks/rewards from renting contracts. Costs of pretty much every cost for a landlord go up & down, albeit mainly up at the moment with .. & ... & ... & ...

        I know interest rates are currently going up, but when they dropped like a stone to historic lowest ever level, doubt many if any landlords reduced their rents. (Did anyone?? I didn't..)

        I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

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          #5
          The students are correct.

          You have agreed and signed a contract - if you now break it you can be sued for breach of contract.

          You have made a mistake with having an inflexible clause regarding bills in that contract, you should have built in 'fair usage limits' and/or 'unexpected cost increase' clauses.
          You now have to suffer the consequences of that mistake.

          If energy prices had nosedived (LOL) then the students would still have to pay the fixed price that they had contracted to pay.

          You can try and negotiate a change to the contract, but neither party to the contract has to agree to any changes.

          They haven't moved into the property and their contract says it doesn't start until 1st September, however they have signed and paid a deposit.
          If they haven't moved in then it's not yet a tenancy, but it is a contract to grant a tenancy on 1st September, at a fixed price.
          Which begs the question of just what the deposit you have taken is, and how you legally need to handle that deposit.
          It can't be a tenancy deposit if there isn't yet a tenancy, so is it a holding deposit or is it something else?

          One thing that you definitely don't do is re-advertise and let to another group of students.
          You have already contracted to let it to this first group as from 1st Sept, you can't let it twice.

          Comment


            #6
            Annoyingly I have put a clause in the contract for fair usage of the gas and electric, but its aimed at excessive use not actual unit costs and the students are using this to their advantage. Its annoying as they know its wrong but have me over a barrel!

            I've been renting to students for 20 years and enjoy doing it, but this one has caught me out!! Kicking my self over it, ah well I thought I would ask the question and now I have the answer all be it not the one I want!

            Comment


              #7
              You can ask them to pay more. They don't have to.
              I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

              Comment


                #8
                You might want to consider fixing the energy price in future when you fix the rent. Then you won't have any nasty surprises. (I fixed mine until May 24, and would be outraged if they tried to welsh on it now.) Therefore don't welsh on your tenants, just in the name of profit.
                To save them chiming in, JPKeates, Theartfullodger, Boletus, Mindthegap, Macromia, Holy Cow & Ted.E.Bear think the opposite of me on almost every subject.

                Comment


                  #9
                  You've signed a contract and you're bound by it.
                  But the students are being a bit naive if they're not being flexible at all.

                  If you break the contract, either by demanding a different rent or refusing to honour it at all, the tenants can claim either claim compensation for any loss arising from your breach, or they can go to court and demand that you honour the contract.

                  There are two difficulties for them.
                  One is that all of the students would have to take the legal action together (or at least, formally agree that they are allowing one or more of them to handle the claim on their behalf and that they'll not act separately or disagree with the outcome) and that it's quite difficult to know with any degree of certainty what their loss would be.

                  But the difficulty for you is that one likely outcome is that a court would order you to honour the contract.
                  As you note, the problem isn't that you can't honour it, it's just that you'll make less profit than otherwise, and that's just a risk trading as you do.
                  So the court isn't going to be very sympathetic, to say the least.

                  Had energy costs fallen, you weren't planning to reduce the rent, and that's about the only question the court needs to ask.

                  And, if you do break the contract and let to someone else, and the court instructs you to honour this agreement, you're going to be in more trouble than now.

                  On the other hand, are the students going to go through with the legal action at all if you simply decline to proceed?
                  Will they be able to get a hearing in time to move in when they (presumably) need to?
                  What if they don't win performance of the contract, and get compensation instead - what do they do then (they have money, but nowhere to live)?

                  One option might be to talk to a solicitor and ask them to construct an offer to the tenants along the lines of, my client is of the view that any compensation that might arise from a breach of the contract is likely to be less than the cost to them of honouring the agreement, and so is going to breach the agreement unless a compromise can be reached on the rent.
                  Because the cause this issue is out of your hands and pretty well publicised, they might be able to find a way forward.

                  But the rent is going to have to be a significant compromise, you can't reasonably expect to make anywhere near the hoped-for profit given that the students had no way to mitigate the problem and you did (although I don't think anyone would blame you for not expecting such an increase.)
                  This is your business and this is one of the risks implicit in it coming home to roost.

                  And any solution is going to have to bear in mind two things:
                  There's another huge increase pretty inevitably going to happen in October.
                  I would expect the energy suppliers to see your type of property as a huge profit opportunity, because it would suit them to switch you out of a normal residential supply, so you're outside the retail cap mechanism altogether, like any other business user.

                  When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                  Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                  Comment


                    #10
                    I have a student house and in the last two years the students have not always been in the house due to COVID, University closed, Zoom lectures, isolation etc., but they had not sought to void the contract ,and I am very grateful that they did not. If we had a reoccurance of the dreaded and we have another lockdown I would imagine the tenants would welcome the cancellation of the rental agreement and you could come to a mutual agreement!

                    In my area I don't find it easy to find 4 students to share a house and I can imagine it is more difficult to find 8 so I would be concentrating on trying to make sure the energy costs are at a minimum by checking the radiator TVRs, heating timing systems etc. I always used to keep records of monthly usage so that I could identify higher usage and trying to deal with any problems arising. There is also the possibility that energy costs level off and that £800 per month is the worst it will be - let's hope.


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                      #11
                      Another good reason to stop this ridiculous practice of signing contracts so far in advance. Far better to just take a holding deposit.

                      Comment


                        #12
                        I'm surprised you are able to find everyone who is able to pay a year in advance but well done in finding them.

                        However you are legally tied in. I'm afraid you have to absorb any loss.

                        Also I'm pretty sure you have benefited by a fair bit over the years by overestimating what the bills would be. It's a two way thing.

                        Finally, when mentioning 'fair use' in a contract, in future always quote a fixed figure within a tenancy clause eg..£4000 per year for gas and electric , £1000 a year for water and so on. Then add to the clause that all are joint and severally liable for any excess should it occur, which solves the problem of arguing about who used the most of this, that and the other.......and it also focuses their minds on saving energy.

                        Comment


                          #13
                          As a parent of 2 students in different cities who have booked houses for next year I think it would be entirely wrong to break the contract legally and morally. I would be furious if that happened to my kids. Remember students have parents who may well help them with any legal action - I know I would! Or they may be 3rd year Law like one of mine...
                          Unshackled by the chains of idle vanity, A modest manatee, that's me

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                            #14
                            Originally posted by landlord666 View Post
                            Finally, when mentioning 'fair use' in a contract, in future always quote a fixed figure within a tenancy clause eg..£4000 per year for gas and electric , £1000 a year for water and so on.
                            You need to specify the number of units of each utility, not the amount of money. The current price hikes for energy would make a nonsense of any 'fair usage' figure quoted in £ and may well make it unenforceable.

                            Comment


                              #15
                              Originally posted by DPT57 View Post

                              You need to specify the number of units of each utility, not the amount of money. The current price hikes for energy would make a nonsense of any 'fair usage' figure quoted in £ and may well make it unenforceable.
                              You're probably right regards enforcement. I use the monetary figure more as an 'awareness' for students to think about saving energy.

                              My contract clauses are based after perusing a number of letting companies' and PBSA corporate agreements, all of which utilise 'monetary' figures rather than KWh etc. I always give generous allowances so it is unlikely they will be exceeded unless they really go overboard with wasting energy.

                              I've come up with a very good formula over the years (based on boiler programming and temperature) which again has worked very well. Whether it is enforceable is again unlikely but that's not the intention and would be used as a last resort. Also, If the costs come in well under, they get a rebate. I'm a nice LL !

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