HMO landlords warned not to over-charge 'all inclusive' tenants as energy bills soar

Following energy regulator Ofgem's decision to raise the price cap by nearly £700 a year per household, HMO landlords have been warned to observe the 'maximum resale value' and not offset their higher energy bills by charging their tenants extra.

Student house shares, professional HMOs and dedicated build-to-rent properties that form part of a larger development often offer all-inclusive tenancies.

The warning came after Labour MP Steve McCabe asked the government to clarify whether it had assessed the potential capacity of a landlord or letting agent to increase a tenant's utility bill mid-way through an assured shorthold tenancy contract.

Housing Minister Eddie Hughes replied that where the landlord was responsible for paying the energy supplier and billed the tenant separately to rent, they could only charge for the 'maximum resale price' which includes the energy the tenant has used, the tenant's share of the standing charge, and the VAT owed.

Landlords and agents who offer 'all inclusive' rent deals are deemed to energy resellers and are governed by Ofgem rules.

Its guidance states that if the reseller (landlord) underestimates the cost of energy supplied, 'he is obviously entitled to recover the amount undercharged from the customer'.

Civil proceedings

But it warns that anyone who charges more than the maximum resale price may face civil proceedings for the recovery of the amount overcharged and might also have to pay interest.

Some HMO landlords are doubtless considering increasing rent to recoup the added expense.

While HMOs have traditionally generated higher returns than standard properties (between July and September last year, individual flats achieved average yields of 5.9%, according to consultancy BVA BDRC, while HMO yields were a fifth higher, at 7.2%) rising interest rates have now started to erode margins.

Many HMO landlords have already received higher energy bills because of the move towards working from home, which has driven up home energy use.