The top property search term for UK renters today is “bills included” – a phrase that didn’t even figure in the top five tenants’ requirements 12 months ago. Renters’ priorities when looking for a new home have changed as a result of the energy bills crisis, according to research by Rightmove.
People want more certainty about their monthly outgoings due to rocketing energy bills. The majority of private rental properties in the UK don’t include utility bills in the rent, although some student houses are let by landlords on a bill-inclusive basis.
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Published in August, the survey highlights how worried tenants are about the prospect of a massive hike in energy prices. For the first time in history, online searches for properties with bills included have overtaken searches for “pets allowed” and “gardens”.
Pros and cons of bill-inclusive lets
The question is, are bill-inclusive lets a good idea for landlords? An all-inclusive tenancy involves bills being bundled together with rent, so the tenant pays only one monthly amount to the landlord. Then, the landlord pays for energy, Internet, council tax and other bills, as detailed in the tenancy agreement.
A non-inclusive let involves the tenant paying only the rent to the landlord and handling all the other bills separately. Now tenants who fear budgeting uncertainty are increasingly turning to bill-inclusive lets to offer them greater financial security.
There are pros and cons to a bill-inclusive let. One advantage for landlords is providing a type of let that’s popular with young people and students, so you’re making the property more attractive to a wider range of tenants. It’s well-suited to HMOs and makes budgeting easier for the tenant.
Students in particular tend to like all-inclusive tenancies, as it takes the hassle out of splitting bills among the occupants.
However, the main disadvantage is the greater amount of responsibility it places on you as a landlord. You will have to find the best suppliers for all utility bills and negotiate the fluctuating costs.
There’s also a risk of tenants over-using energy, so the rent won’t cover it. This can lead to friction between landlords and tenants, as it can be difficult to determine what is acceptable use.
As the landlord, you’re responsible for paying all the bills, so if your tenants fail to pay the rent and inclusive service charges, you’ll still have to pay the bills.
All-inclusive tenancies decline
UK landlords are shying away from all-inclusive tenancies in light of soaring energy bills, according to data released on 26th August by UK lettings technology specialist Vouch. The number of tenancies advertised with bills included is 90% lower than in January this year.
Numbers started to decrease in March, just before the first Ofcom price cap change, as landlords were unwilling to take the risk of being responsible for higher bills. According to Citizens Advice, around 585,000 households (13% of all tenants in the UK private market) currently have energy bills included in their rent.
They are most popular among HMOs, student rentals and new build-to-rent developments. However, with the number of landlords offering bill-inclusive lets declining, industry experts believe they may soon become a thing of the past.
The energy price cap (the maximum annual tariff suppliers can charge households) is to rise by 80% to £3,549 in October. Where existing all-inclusive tenancy agreements are in place, the landlord is obliged to honour the obligations.
However, the dramatic change in the energy price cap means it may be hard for landlords to keep up with the rising costs. According to a survey of letting agents on the way forward, scrapping all-inclusive lets may be landlords’ best option to keep their own costs down – tenants should pay for their own energy usage.