im Haliburton Answers Everything You Want And Need To Know About Fitting Prepay Meters in HMOs
These questions and answers are from a HMO Daddy publication and if you have further questions you can ask Jim Haliburton for free.
Why are you changing your properties to Metro Prepaid Meters?
Because Metro Meters are administered online and the money is collected online, it is now easier to account and audit this income. I expect each property will see an increase in income when the income from Metro meters in received, no longer will we have to deal with the administration of selling electric tokens for meters
When Metro Prepaid Meters are fitted, will I no longer have to pay for electricity?
It does not mean you do not have to pay for electricity. The landlord pays for the electricity into the property; this bill has to be paid. Income from the Metro Prepaid Meters will be added to the income produced by the property, like additional rent or having an extra room. You will still be paying for the electricity for the communal areas but the cost of electricity will be offset by the income produced by the meters. Each room will be metered and the tenant pays for the electricity in their own room.
By law, landlords are not allowed to make a profit on the resale of electricity used by the tenant and the landlord may still have to pay for the communal areas and standing charge. I say 'may' as I have analysed for 30 years the electric, gas and water usage in my HMOs and the income from prepay electric meters. I find enormous variability, for which I am able to identify the use. Some properties use a lot more electricity or produce more income from prepay meters than others for no identifiable reason.
Regarding electricity meters, is it legal to fit them?
The fitting of sub meters or pre pay meters is perfectly legal. I have been doing it for decades. The only restriction is that you are not allowed to make a profit out of the resale of electricity, though you are allowed to recover all costs. The recovery of all costs is rather vague and could be interpreted to mean you could include a contribution towards the cost of installing and maintaining the meters and the cost of communal electricity.
What can you charge for electricity using Metro prepay meters?
With Metro prepay meters, you set the charges as you wish but you are not, by law, allowed to make a profit. For fairness, I keep the charge for electricity at least than the highest tariffs being offered by suppliers, which is currently over 50p per kilowatt. The lowest charge is about 15p per kilowatt but there are high standing charges at the cheapest rates, so it makes the actual cost of electricity per kilowatt difficult to calculate.
I know electricity companies are not allowed to turn off the supply of electricity to residential occupiers. Would using a prepay meter be seen as disconnecting the supply for a tenant, if they are unable to pay?
If a tenant fails to maintain sufficient credit on the meter then they effectively disconnect themselves, this is permissible. Landlords are not permitted to disconnect tenant, for example, cutting the supply to the room or property if the tenant does not pay their rent even if the utilities are included.
I appreciate it is a subtle distinction and the effect is the same, the tenant no longer has electricity but one way is legal the other is not. What utility companies are allowed to do is fit prepay meters and recover the outstanding debt by charging an amount every week, which can be as high, in my experience as £20 per week.
Will the use of electricity meters deter potential new tenants?
It may do, we have had no experience of it deterring tenants but then again, we would not know as the tenants would not come and apply for accommodation if they know we charge for electricity.
We occasionally get asked what the electricity would cost and if it is a room, we tell them very little, unless the tenant uses an electric heater or has a fridge or cooker.
The electric light is usually not metered for safety reasons and in a room, there is very little else which uses very much electricity unless the tenant uses an electric heater. The electricity used by a phone, laptop charge or TV is very little.
When fitting a prepay meter, it is expected that tenants will have a given amount of electricity per month, or do they pay for all the electricity they use?
We usually get the tenant to pay for all electricity, no allowance is given. It is only when we introduce meters to an existing tenant who objects, one of the ways of persuading them to allow a meter to be fitted, is to give them a one off credit of £20 to start with. With new tenants, no allowance is usually given unless we house contractors and their company is paying, in which case we keep their meters topped up.
The other way to persuade an existing tenant to allow a meter to be fitted is if they are a tenant who has been with us for sometime, is to give them a choice of £10 a week rent increase or have a meter fitted. They always opt for having a meter fitted.
With Metro prepay meters, how do tenants pay? Can this be done at the meter, online, or do they need to approach the landlord?
The big advantage of fitting Metro pre pay meters over other makes of prepay meters, is the administration of selling electricity is done by Metro pre pay meters. The tenant can pay online either direct to Metro prepay meters or go to any PayPoint outlet. Metro prepay meters do all the administration, they send us a monthly account, a month in arrears, showing each individual meter in the property and what had been paid.
Why are you fitting prepay electric meters?
The reason I started to fit prepay meters about 25 years ago was to stop tenants abusing the supply of free inclusive electricity. I found that by fitting a prepay meter, this cut the electric used in the HMO by up to 50%. Tenant behavior changed.
Before fitting prepay meters, when I went around the property many of the tenants would leave everything switched on in their room. After prepay meters are fitted, they would leave nothing switched on.
There is also the benefit of increasing the income from the HMO. I find that the meters not only reduced the cost of electricity, but their income from the Metro Prepay Meters substantially reduced (and can even eliminate) the cost of providing electricity. It should also be appreciated that by reducing energy usage, you are doing your bit towards saving the planet
Do tenants abuse the meters?
Unfortunately, very occasionally. What happened is some tenants bypass the meter or run extension leads from the communal areas to steal electricity. We have at times had widespread abuse.
When I catch tenants running extension leads, I remove them and leave a note telling them that they are stealing electricity and if they want the extension lead back, they will have to see me. I have obtained a lot of extension leads by these means, no one had ever asked for the extension lead back.
One of the ways I can identify a tenant who has bypassed the meter, is I find everything switched on. Go into a room when the tenant is not there and if you find electric appliances switched on, 99 out of 100 times you will find they have run an extension lead or bypassed the meter to avoid paying for it.
Do you have to buy electricity from Metro Prepay Meters?
No, you are to choose our own supplier. I scour the market for the cheapest supplier and I have never found anyone who can do better when the standing charges are factored in, but please let me know about any other competitive suppliers. I set the rate for which I resell the electric to the tenant and Metro Prepay Meters process the payment from the tenant.
Prepay Meters cost to buy?
It depends on how many you buy and where you buy them. Currently the Metro Prepay Meters METO01 single phase meter that we use costs around £40. Always negotiate a price with your supplier. Normally you expect to pay over £140 for an electric prepay meter. The reason the Metro Prepay Meters are so cheap, is, I believe, because Metro Prepay Meters are selling them at close to cost to encourage sales.
Metro Prepay Meters strategy is, I believe, to make their money long term from recurring charges in administering the purchase of electricity through the meters.
Are landlords doing enough to conserve energy?
Let's take a step back and ask, does energy conservation even work? I would like to do my bit to save the planet and at the same time save on my heating costs. I have tried numerous energy conservation measures in the 160 HMOs where I provide 24/7 heating and hot water. Unlike most landlords I keep a weekly log of the energy used by taking the meter readings and I cannot identify any change in the energy used or any change in the before and after performance of the property after fitting conservation measures. Conservation in my experience does not work.
To give one example, I replaced 30 year old gas boilers which could have been repaired and fitted a new rated A rated gas boiler because I was told they were up to 40% more efficient. After I replaced the boiler (which cost me a lot more than getting the boiler repaired) and monitored the before and after usage of gas I realised there was no change in the gas used in my HMO. Since then I have replaced numerous boilers and found the same. How can an A rated boiler be considered to be up to 40% more efficient when there is no change in the energy consumed?
Am I doing something wrong or does energy conservation not work in practice?
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