Landlord Law ‘bills included’ tenancy agreements

When a property is shared, as in an HMO, by people who are not one family, the problem of how to divvy up the bills raises its ugly head.

There are three ways to deal with this:

• Ensure that the bills are put into the name of the tenants, so they are responsible for them.  Although, this is only realistically going to happen where the property is let to one family or close friends.  Who else is going to voluntarily take on liability for someone else’s bills?
• Invoice the tenants separately for the bills, or
• Make the tenancies ‘bills included’

The Landlord Law agreements

For many years, we have had a ‘bills included’ option for members when creating our tenancy agreements.

However, I have been increasingly unhappy about this, particularly since the massive hike in energy bills a year or so ago.  Which negatively impacted on many landlords using the ‘bills included’ model.

For this reason (and also because I was reluctant to complicate them further), we did not give a ‘bills included’ option with the new Welsh occupation contracts.

The effect of the Renters Rights Bill

I am inclined to think that the Renters Rights Bill will finally drive a nail in the coffin for ‘bills included’ tenancies.

Our ‘bills included’ agreements provide for the landlord to increase the rent if they are able to show that the tenants have increased the bills to above the ‘bills allowance’ provided in the agreement.

However, when the Renters Rights Bill comes into force, the ONLY way that landlords will be able to increase the rent is via the section 13 statutory notice procedure.

Tenants will (as now) be able to challenge section 13 rent increases to the First Tier Tribunal on the basis that they are not a ‘market rent’.  I am not sure whether a ‘market rent’ would include the bills element.  Plus the new system will limit landlords options generally as regards rent increases.

My view, therefore is that landlords should in future deal with bills separately from the rent.  If you currently use the ‘bills included’ tenancy agreements, I suggest that you change this as soon as you are able.

Note that if tenants are unwilling to sign a new tenancy agreement where you are moving from a bills included basis to a bills not included basis, at present you can serve a section 21 notice on them.  You will not be able to do this once the new regime is in force.

It may be possible to change the way you charge for bills under the transition rules and/or any regulations that are made under clause 12 of the draft bill (which I discuss here). 

However, as (at the time of writing this) we don’t know what those regulations will be, it is probably best to change your arrangement with tenants to deal with bills separately from the rent before then.

Later Note

A member has asked in the forum that I consider retaining the ‘bill included’ tenancy agreements for student tenancies.

I may therefore do this, but I don’t want to make any decisions untiil the final form of the bill – and how it will affect tenancy agreements – is known.

Any members wanting to add their views to the forum post will find it here.