Should you include utilities for a rental property?

BMT team — Mon, 22 Jul 2019 00:29:09 +0000

There are many important decisions to make as a landlord and balancing outgoing and incoming expenses is paramount. Landlords want to maximise cash flow and boost the return from their investment property. When considering how best to do this, questions surrounding whether to include utilities for a rental property often arise. Contents Advantages Disadvantages Other considerations Advantages of including utilities in a rental property One of the main advantages of including utilities for a rental property is that bills don’t need to be double handled. Rather than receiving a bill, sending it to the tenant and collecting the sum in time for payment, the landlord can simply include it in the cost. This gives the landlord the potential to charge a slightly higher rental price. Plenty of prospective tenants will love the idea of having utilities included with the rent as it reduces stress and effort on their part. For electricity and gas, if a premise is not separately metered the landlord is required to include utilities for the rental property. A premise is considered separately metered if the usage by the tenant is measured distinctly from the usage of the landlord. While this is a requirement under most tenant agreements, it can prove to be beneficial for the landlord. Including utilities will save the landlord time and effort in calculating the percentage of energy used by the tenant. Utilities paid by the landlord are also tax deductible. The Australian Taxation Office governs legislation that allows landlords to claim an immediate deduction for costs like electricity and gas in the year the expense was incurred. If the tenant covers the cost of electricity and gas, the landlord cannot claim this. Disadvantages of including utilities for rental property Including utilities can be beneficial but there are certain drawbacks. The landlord will have higher financial responsibilities and even heightened liability. There is also the risk of tenants having an ‘all-you-can-eat’ attitude. That is, when tenants don’t have to pay for consumption they often consume more. The landlord may end up paying a hefty amount on top of their existing expenses if this is the case. If electricity or gas rates go up, this will also increase the utility bills. Even if a landlord has previous billing information to base their pricing on, utilities can be unpredictable. Price fluctuation and market conditions can both affect the price you pay each month. Other considerations If a tenant is paying for utilities, will the payments be fixed or variable? It’s important for landlords to consider this before leasing the property. A fixed rate is typically more convenient for both parties and can even strengthen the landlord-tenant relationship. On the other hand, a variable rate is harder to manage but is more reflective of the actual costs being paid. Landlords should also think about the structure of utility payments. Will the tenant pay for utilities and rent as two separate expenses or as one total cost? Will there be an additional fee if utility payments are late? It’s important to remember there is no right or wrong way when it comes to utilities for a rental property. There are several advantages and disadvantages for each investor scenario. Careful planning and proper consideration of your financial situation will help you make the best decision for your investment property.

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Landlords and tenants rights and responsibilities explained

BMT team — Sun, 17 Mar 2019 23:16:03 +0000

Throughout a residential tenancy landlords and tenants have various responsibilities which must be upheld. In Australia state-specific legislation protects both landlord and tenant’s rights. As legislations are often amended it’s imperative landlords understand what their responsibilities are as investment property owners, as they are obligated to abide by state law. When a tenant moves into a rental property the landlord or Property Manager must have ensured the premises are habitable and in a reasonable state of cleanliness and repair. The tenant is required to keep the rental property clean and tidy and, taking into account normal use considered general wear and tear, hand it back in a similar condition to how it was found at the start of their lease at the end of the tenancy. In this article we will explore: Choosing a tenant The bond Responsibilities of the landlord to the tenant Maintenance inside the property Maintenance outside Swimming pools and spas Respect for the tenant’s right to privacy Seek expert advice Choosing a tenant The landlord has the right to choose the most suitable tenant for their property. However, under the Equal Opportunity Act they must not discriminate against any of the applicants based on their gender, age, race, religion, marital status, sexuality, having children, pregnancy, mental illness and disabilities. If they do, they could be liable to pay damages or fines. The bond Rental bonds are paid by tenants at the start of their tenancy and are a goodwill payment held in trust by the specific state government rental authority. They are a financial protection for the landlord in case the tenant breaches the terms of the tenancy agreement. At the end of the tenancy damage to the property may be paid for out of the bond if both parties agree. However, landlords cannot charge tenants for any fair wear and tear of property that may have occurred during the tenancy. The process then becomes a little more complicated if there is any damage as both parties must agree the damage and cost of any repairs occurred during the tenancy. For example the landlord may make a claim on the bond for: rent not being paid damage caused by the tenant or their visitors cleaning expenses abandonment of the premises by the tenant landlord being forced to pay tenant’s bills loss of landlord’s goods Responsibilities of the landlord to the tenant During a residential tenancy, landlords have a number of responsibilities to their tenants, which are enshrined in the relevant legislation. At the time of signing the lease, the landlord/Property Manager is required to give the tenant a copy of the relevant State or Territory booklet outlining their rights. Maintenance inside the property During the tenancy, the landlord/Property Manager must keep the premises in a reasonable state of repair and comply with building, health and safety laws. They are responsible for the upkeep of the property (for example plumbing and the maintenance of provided contents such as the dishwasher or air conditioner). Landlords are required to ensure that all properties are fitted with smoke alarms. The number of alarms much be appropriate for the property size, as prescribed under the Building Code of Australia (‘the Code’). The alarms must also be working in accordance with Australian Standard 3786-1993 and correctly positioned as under the Code. Health and safety laws also require that landlords must ensure that any window coverings with cords or similar hazards are in line with existing requirements. For example, in NSW all blind cords can’t be within reach of children due to the risk of strangulation. These rules apply whether the tenants have children or not. The tenant is responsible for basic household maintenance such as replacing light globes, cleaning windows, dusting and removing cobwebs inside and out and ensuring there is adequate ventilation to help avoid mould problems in winter. Maintenance outside The tenant is responsible for garden maintenance such as mowing, edging lawns, weeding and pruning. If the tenant becomes aware of any potential damage to gutters as a result of leaf blockages or notice a water leak, they are required to advise the landlord or Property Manager. The landlord is responsible for maintenance of any garden reticulation system, tree lopping, cutting back overhanging branches (such as those near power lines) and maintaining firebreaks unless your tenancy agreement says otherwise. Swimming pools and spas If the rental property has a swimming pool or spa, the tenant is responsible for keeping the pool or spa or any associated equipment in a properly treated and clean condition. They must also observe all legal requirements relating to pools or spas during the period of the lease. The landlord or Property Manager is responsible for ensuring the pool or spa is secure, that it’s child safe and complies with pool safety standards. At the beginning of any tenancy, the landlord or Property Manager should make sure the water is clean, chemically balanced and the pool and equipment have been serviced. The tenant should also be provided with the necessary tools and equipment for day-to-day maintenance such as vacuums, hoses, brushes and scoops. Unless the lease states otherwise, the tenant is responsible for the day-to-day maintenance and upkeep of the pool such as cleaning and maintaining the chemical balance of the water, including the purchase of pool chemicals. Respect for the tenant’s right to privacy The landlord/Property Manager is not to enter the premises to carry out a general inspection until after the end of the first three months of the tenancy (depending on the relevant state legislation) and even at this time should always follow the rules regarding proper notice periods. Seek expert advice Resources: There are many great tools and resources available online for both landlords, tenants and Property Managers to help make the process of renting as easy as possible for all parties Property Managers do more than just advertise for tenants, they can make a landlord’s life easier. Property management isn’t just about collecting rent. It’s about ensuring the landlord’s property is always rented and making sure the best possible tenants are chosen. They make sure the property is well maintained, track […]

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Should you include utilities for a rental property?

Landlords and tenants rights and responsibilities explained