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9 months ago

The Landlord’s Guide to Efficient Energy Management

As a landlord, efficiently managing energy benefits your tenants and your property investment's financial return and carbon footprint. This guide will help you navigate the intricacies of energy management, including whether you should include energy costs in rent.

Understand Energy Efficiency

Landlords in the UK are likely already aware that efficient energy management is a critical responsibility. It's essential to clearly understand why energy efficiency matters and the legal requirements you must comply with.

By practising ‘energy efficiency’, you'll use less energy to accomplish the same tasks, reducing your energy consumption and lowering costs. Understanding the importance of this will benefit both you and your tenants. For you, it equals lower operating costs and better profit margins. For tenants, it makes your property more attractive to those concerned over environmental sustainability and cost savings.

Well-insulated properties are typically more comfortable, with stable temperatures and fewer irritating draughts. They also cut down on greenhouse gas emissions and have a better all-around carbon footprint.

The UK Government has established specific responsibilities for landlords regarding energy management. It‘s required to hold an up-to-date Energy Performance Certificate (EPC), which is a document rating the energy efficiency of a property on a scale from A (best) to G (worst). EPCs provide information on the property's efficiency and potential improvements.

You must provide a certificate to prospective tenants before they sign a tenancy agreement. To legally rent out your property in England or Wales, the Minimum Energy Efficiency Standards (MEES) require you to obtain a minimum rating of E.

Decide Whether to Include Energy Costs

When it comes to managing the energy costs for your rental property, one crucial decision you'll need to make is whether to include energy costs in the rent or not. This decision has significant implications for both you as the landlord and your tenants, so let’s break down the pros and cons of each approach.

Including Costs in Rent

Pros

Tenants benefit from predictable monthly expenses as they don't have to worry about fluctuating utility bills, making budgeting much easier. Also, since tenants don't handle utility bills themselves, there is less potential for disputes or overdue payments.

Cons

Tenants may not have the incentive to conserve energy since it doesn't directly hit them in the pocket. This could lead to higher consumption and increased costs for you as the landlord. If your property isn’t particularly energy efficient and you include costs in rent, you may end up overcharging tenants, which would likely make them unhappy.

Excluding Costs from Rent

Pros

Tenants have an incentive to conserve energy, as they pay for what they consume. This can lead to more responsible energy use and savings for both parties. Excluding energy costs also ensures that bills accurately reflect consumption, which can some see as a fairer arrangement.

Cons

Managing separate utility bills and ensuring tenants set up their accounts with energy providers can be time-consuming and may require some extra admin work from you. There is also the potential for disputes if tenants are unhappy with the bills they receive.

Ultimately, whether you choose to include or exclude energy costs from rent depends on various factors. Regardless of your decision, it’s crucial to communicate this clearly in the tenancy agreement to avoid misunderstandings.

Improve Efficiency

Improving the energy efficiency of your rental property is not only a responsible choice but can also yield long-term financial benefits. The most effective way to do this is to ensure your property has sufficient insulation, avoiding unnecessary heat loss.

Man in kitchen holding a cup of tea

You should always insulate lofts, walls and floors, and insulate doors and windows properly. You also shouldn't underestimate the power of double glazing.

If appliances like the fridge or washing machine are on the older side, it’s probably worth investing in more modern alternatives. New appliances with smart features and LED lighting consume less electricity and gas, reducing costs and emissions.

Smart thermostats and meters allow for precise, real-time management of energy usage, helping you cut down. You should consider installing these devices to enable tenants to control their heating schedule and unplug energy-hungry appliances.

If you want to take your efficiency improvements a step further, you could explore renewable energy use for your rental property. Evaluate the feasibility of installing solar panels to generate your own electricity and look into heat pump solutions.

By investing in energy-efficient improvements and systems and ensuring proper maintenance, you not only enhance the value of your rental property but also make it a more attractive prospect. Additionally, energy-efficient homes contribute to a more sustainable future, aligning with the UK's commitment to a net-zero society.

Clarify Your Billing Process

One of the first considerations for energy billing is using separate meters for each rental unit. This ensures the accurate measurement of each tenant's energy consumption, making billing more fair and transparent. Make sure each unit has its own electricity, gas and water meters (where applicable) that your tenants can check themselves.

To avoid potential disputes, clearly outline the billing process in the tenancy agreement. Specify when and how tenants will be billed for their energy usage and provide them with information about local utility providers. This can be especially helpful for first-time renters or tenants who are new to the area.

If you choose to include energy costs in the rent, ensure that the total amount accurately reflects the expected energy costs. For properties where tenants are responsible for their bills, ensure they receive regular utility bills so they can manage their usage and expenditure.

Effective communication with tenants is essential for smooth-running energy management. Address their questions or concerns promptly and encourage them to report any maintenance issues that could affect energy efficiency, such as faulty boilers or draughty windows. Providing tenants with guidelines on energy-saving practices is also a good idea.

How Landlords Can Save Money on Energy

With energy prices hitting worrying highs, many landlords in the UK are looking for opportunities to cut bills for their rental properties and maximise profits. At BusinessComparison, we can help compare deals from gas and electricity suppliers, allowing you to find the best energy rates.

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Sam White