United Kingdom

Who pays when utility bills rise?

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Can landlords and their agents pass along utility price increases to tenants?

Many landlords, especially in the HMO and Build to Rent sectors, pay utility companies directly and then recoup the money from tenants, either by charging them for their energy usage or by setting an increased rent to compensate. Since utilities prices began climbing and the energy price cap rose by 54% earlier this month, these landlords have been receiving larger bills than usual.

Campaign groups now worry that landlords will increase rents by potentially hundreds of pounds a month to cover this, while also keeping government support such as the £200 energy rebate for themselves.

In a response to a question in Parliament, junior housing minister Eddie Hughes clarified that housing providers can only charge tenants the “maximum resale price” of utilities: the cost of the energy the tenant has actually used, plus their share of the standing charge and VAT.

Residential landlords are classed as energy resellers by OFGEM, meaning that they cannot charge a higher unit price or standing charge than they paid to their own supplier. When billing tenants for utility use, they must calculate the bill using the tenant’s meter readings or, if the tenant does not have a separate meter, a reasonable estimation. Landlords overcharging for energy can face civil proceedings and be ordered to repay the excess plus interest.

Meanwhile, landlords who charge an all-inclusive rent instead of passing on energy bills to tenants can increase the rent to account for increased utilities bills or for any other reason, either by agreeing a new rental amount with the tenant or issuing a statutory notice. However, they cannot increase rent during a tenant’s fixed term without their agreement unless the tenancy includes a rent review clause, meaning that those landlords who didn’t expect energy bills to hit historic highs could be left out of pocket – at least until the fixed term ends.

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