The £400 energy grant. Should landlords be passing this onto their tenants?

It is estimated that around 13% of rental properties are let on an “all-inclusive” basis. This means that utility bills, council tax etc. are included within the rent charges. Historically, this has made life easier for tenants and landlords alike, in particular for houses of multiple occupancy. However, in most cases, these all-inclusive rental prices were set before taking into account the current soaring costs of energy which means this model may not be sustainable for landlords in the long term.

When landlords opt to rent a property in this way, they are prohibited from overcharging tenants for the energy they have used, to try to make a profit on this. Simply put, they can only charge for the energy used, the standing charge and the VAT – nothing in addition.

In July, the Government announced that they would be offering all households a £400 energy grant which will be administered by the energy suppliers over a 6-month period starting in October. The discount will be applied to the bill payer’s account, and therefore it is only the bill payer that receives this discount. In cases where an all-inclusive rent is paid, it is the landlord and not the tenant who will receive this.

The Government has gone further this week by introducing a price cap from October of £2,500, which should ease the pressure on many bill payers.

But – should landlords be passing this saving onto their tenants?

The government have stated –

“landlords with a domestic electricity connection who charge ‘all-inclusive’ rent, such as the case for many student houses, where a fixed cost for energy costs are included in their rental charges, should also be passing on the discounted payments to tenants“

Housing charities have, along with the government, agreed that this support should be given to the tenants rather than being kept by the landlord, and have urged the government to make sure that this happens – in particular, in situations where landlords have already raised their rental prices to take into account the higher energy bills.

The situation however is not as cut and dry as they would have you believe. There are many landlords who have not increased the rental prices and instead have been forced to absorb the increase in energy bills themselves.

So what’s fair and legal?

To put this very simply, landlords should not be making a profit from charging for energy, or from this grant. If a landlord has already increased their rental prices to take into account the rising costs of energy, then this £400 rebate should be paid to the tenants. It is possible that tenants could take civil action against their landlords for profiting from the charges.

However, those landlords who have already chosen to absorb the cost of the increasing prices and not increased the rent accordingly are very much entitled to keep the rebate money, as it is going to the person who is paying the bill and directly affected by this energy crisis.

If you have questions about the impact of rising energy costs and what they could mean for your tenants and the impact on the stability of the tenancy, please get in touch. Woodstock are here to help you navigate these difficult times and find the best possible solution for everyone involved.