Landlords and their tenant’s utilities usage
Landlords must be vigilant if your rental property’s power and water consumption is for their own account.
Ultimately, as a landlord, you are responsible for paying the municipal services account on your rental property. If you do not pay this, you are risking having the services cut off and you will put your credit rating in jeopardy. Worse is if the outstanding amount is so massive, and the municipality takes legal steps to recover this, you could even lose your property.
As a general rule, most lease agreements state that the tenant is responsible for the payment of power, water, and other utilities used by the tenant. What should be noted is that this should be made very clear in the lease agreement so that the tenant can understand what is expected. There are options:
- You and the tenant agree that the rent paid includes the cost of utilities. The problem here is that this is a fixed amount, and if the tenant exceeds the average, or utilities are increased by the municipality, those will not be covered. This means you could find yourself having to pay for the excess out of your own pocket.
- You and the tenant agree that the tenant will pay for utilities. If the property is rented in its entirety, you agree to provide the tenant with the municipal bill, which the tenant will pay. If the property is partly rented, you must agree with the tenant what percentage of the bill he/she will pay.
- Install pre-paid meters on the property. Here the tenant will be in complete control of their consumption.
It should be noted that many municipalities will not allow for electricity accounts to be opened in any name other than that of the registered property owner. This is why a prepaid meter is an excellent solution.
Also, you are not allowed to charge your tenant for property taxes. However, you can factor this into the monthly rent.
Reasons to watch utility usage
There are many reasons to monitor a tenant’s usage of municipal services, some of which relate to safety and health, others to the ongoing property’s condition:
- Abnormal electrical use can put a strain on the property’s electrical infrastructure.
- Wiring and circuits can be compromised by heavy usage.
- Frequent power surges can strain the DB board and appliances like air-conditioners.
- Water leaks can cause flooding and permanent damage to the building’s integrity.
- Fire hazards, such as leaving ovens or heaters on permanently, can destroy a property completely.
There are always reasons for higher usage, and a spike should definitely be a cause for concern.
Benefits of monitoring
The major benefit of monitoring your tenant’s consumption of utilities is obviously financial. Saving electricity makes good financial sense. It can reduce the overall cost of having a rental property and offers insights into energy usage, particularly if you work on short-lease agreements.
If your tenant is also aware of their usage, and it is high, it encourages them to adopt energy- and water-saving behaviours. Every South African resident should be aware of their responsibility to reduce pressure on our water and energy consumption. Leaving a tap running while brushing your teeth, for example, is an unnecessary waste of water. Prepaid water meters are an excellent option for sectional title schemes.
If rental includes the use of utilities, you should add into the lease agreement a clause that says you reserve the right to add a ‘surcharge’ if your tenant’s consumption exceeds what is considered a reasonable amount. This can be an actual figure or a percentage.
You must note that by law you cannot increase a tenant’s rental while the lease agreement is in play. You have to wait for the lease to be renewed, and this is regardless of whether the municipality increases the rent during the course of the lease.
Do not abuse your tenant’s utility rights
If your tenant does not pay the utilities as agreed to in the rent agreement, you do not have the legal right to switch off your tenant’s power or water supply. Can a landlord legally disconnect a tenant's utilities?. You will need a court order, and this can be a costly and time-consuming legal exercise. The only time you can recover outstanding utility costs from a tenant is at the end of the lease agreement and from the deposit, and only if this is stated in the lease agreement.
