Pros and cons of offering all-inclusive rent

Offering tenants the option to choose all-inclusive rent may create a little more admin for you, but it could significantly boost your rental property’s appeal.

According to the property trade magazine Property Industry Eye, over half of tenants prefer utility bills included in their rent, but only 12% of available stock on the market across England offers this.

But stop! Before you start calculating an all-inclusive rate, you need to know exactly what you’re letting yourself in for.

We’ve put together a guide to the pros and cons of offering tenants an all-inclusive rental agreement. And if you decide it’s the right option for you? We’ve also provided important information and advice for creating an all-inclusive agreement that is fair, transparent, and mutually beneficial to both parties.

What is all-inclusive rent?

So, to begin, what exactly do we mean by all-inclusive rent?

An all-inclusive or bills-inclusive rental agreement combines the cost of renting the property plus household bills into one price. This setup means tenants don’t have to worry about organising and managing household bills. Instead, the landlord handles household bills like electricity, gas, and water, and the tenant then covers these expenses in their rent payments.

Essentially, you bundle up all the tenant’s household expenses into one neat, hassle-free package.

What bills are usually included in all-inclusive rent?

Ok, so we’ve got the gist of what all-inclusive rent is. Let’s iron out the details next by finding out what bills are typically covered in a bills-inclusive rental agreement.

As the landlord, it is ultimately up to you which bills you include – just ensure you’re crystal clear about this in the rental agreement.

However, it is generally expected that all-inclusive rent will cover all of the following as standard:

• Rent
• Water
• Gas
• Electricity
• Council tax

Beyond these basics, many landlords also choose to include the following:

• TV licence
• Broadband
• TV streaming services or SKY TV

As long as your pricing is fair, the more comprehensive your all-inclusive offer is, the more appealing your property will be to potential tenants.

The pros and cons of offering tenants all-inclusive rent

Offering all-inclusive rent can attract far more interest in your property, yet it’s a strategy that’s not without its challenges.

Before you decide whether offering an all-inclusive rental agreement is the right approach for you, it’s important to understand the pros and cons fully.

Pros

• Enhanced property appeal – If you advertise that your property’s rental price includes bills, it’s amazing how much more attractive an option it suddenly becomes. When tenants see ‘bills included,’ they perceive your service as having more value, as all-inclusive rent can offer them many benefits. Primarily, paying all-inclusive rent rather than managing multiple bills is simple, convenient, and hassle-free. It also means they only need to pay one fixed monthly cost, making it easier to budget. Because they don’t have to pay household bills, they also mitigate the risk of missing payments and receiving penalties.

• Increased demand – Offering bills-inclusive rent can also help your property stand out in a crowded marketplace. By enhancing your property’s appeal, you can increase demand for your rental property, potentially avoid those dreaded void periods, and maintain a steady stream of rental income.

• Peace of mind bills are paid – Have you ever faced sorting out a pile of unpaid bills after a tenant moves out of your rental property? Let us tell you, it’s not a good situation to find yourself in! When you’re paying the bills for the tenant, you have peace of mind that everything is being paid on time, keeping nasty surprises at bay.

Cons

• More work – Offering all-inclusive rental agreements does mean more work for you. You’ll need to keep up with managing payments, renewals, and researching the best deals. This can become particularly time-consuming if you’re managing multiple properties.

• Energy usage disputes – Landlords must proactively communicate what constitutes reasonable energy usage at the start of a tenancy to prevent conflict surrounding energy consumption. It’s best to lay down the rules and communicate an energy usage cap in the rental agreement.

• Financial liability – When the bills are in your name, should your tenant stop paying rent, you won’t just be down on rental income; you’ll also need to cover the bills. You can, and should, include a term in your tenancy agreement that places financial liability for unpaid bills on your tenant to minimise losses incurred from non-payment of rent, but you’ll still be out of pocket in the short term.

Offering a bills-included tenancy agreement offers advantages and drawbacks in equal measure. However, if you draw up your tenancy agreement carefully, it is possible to mitigate much of the risk involved with covering tenant bills within the rental price.

How to implement a bills-inclusive tenancy agreement

For a bills-inclusive tenancy agreement to be successful and mutually beneficial, it’s important to anticipate potential problems and plan and prepare for them within the agreement.

Let’s explore key points landlords should incorporate into their strategy when implementing an effective all-inclusive tenancy agreement.

Fair and reasonable charges

When deciding how much to charge tenants for bills, your rates must always be fair and reasonable. Remember, the aim is to create a more convenient and simple rental service for your tenants – not to make a profit from utility bills.

Offer clarity

The tenancy agreement and all subsequent rental advertisements should be clear and transparent about what bills are and aren’t included in the rental price. Offering clarity from the start helps to build trust and prevents misunderstandings or disputes later down the line.

Include a ‘fair usage’ clause

A common issue with all-inclusive rent is agreeing on what constitutes fair use of utilities like gas, electricity, and water. If you agree to cover your tenant’s bills, you risk ending up out of pocket if they like to swelter in 28-degree heat every hour of the day and night. To avoid being forced to pay up for tenants using utilities irresponsibly, you can include a ‘fair usage clause’ in the tenancy agreement. This clause should specify that tenants will be responsible for covering the cost of any usage that exceeds a predetermined cap. This cap should be set out as a cash limit rather than a usage limit. Should a tenant exceed the energy cap set out in the tenancy agreement, you must provide evidence of their utility usage before you can claim the additional costs.

Provide usage guidance

Providing tenants with information and guidance about how to set heating schedules and reasonable thermostat temperatures can help them to manage consumption. While you can’t dictate their energy usage, providing tips can encourage responsible usage.

Include a non-payment clause

Because all of the rental property’s bills will be in your name, it’s also important to include a clause within the tenancy agreement that sets out the consequences of non-payment of rent and makes tenants liable for household bills. This helps to minimise your losses if tenants decide to up and leave or stop paying rent mid-tenancy.

So, a little bit of research and forward planning can go a long way, helping you create an all-inclusive agreement that is fair, transparent, and mutually beneficial to both parties.

When is it beneficial to offer rent all-inclusive of bills?

When deciding whether to offer an all-inclusive rent package, landlords should consider whether this strategic move aligns with their rental goals. If you decide to offer it, this move can greatly influence your property’s appeal and occupancy rates, but it will also be more time-consuming to manage. There are, however, certain scenarios where offering all-inclusive rent can be particularly advantageous.

All-inclusive rental agreements are particularly popular amongst the younger generations, students, and tenants living in houses in multiple occupation (HMOs).

Younger target demographic

Many younger tenants prioritise convenience and simplicity and prefer to spend as little time as possible on tedious tasks like household management. This demographic often seeks living arrangements that are as straightforward as possible. When bills are included, it frees them from the inconvenience and tedium of juggling multiple utility accounts and payments.

Student lets

If you’re targeting the student market, you’ll already know that many students are living away from home for the first time, and the idea of managing multiple utility accounts and budgeting for fluctuating monthly bills can seem daunting. Offering rent that is inclusive of bills simplifies the living experience for students. If your student let is located in an area where competition among landlords is fierce, offering an all-inclusive package can give your property a significant edge.

Houses in multiple occupation (HMOs)

Similarly, if you let a house in multiple occupations (HMO), whether it’s a student let or not, offering a bills-inclusive rental agreement can be a big perk. This arrangement eliminates the headache associated with dividing bills among housemates, simplifies the rental experience and helps to avoid disputes among housemates.

It’s always a good idea to offer all-inclusive rent as an option rather than a one-size-fits-all solution. You’ll find there’s always the odd few who don’t want to pay rent that’s inclusive of bills and would prefer the flexibility to shop around and organise their own bills.

Why are fewer landlords now offering tenants all-inclusive rent?

We’ve heard earlier on in this article about the dramatic decline in landlords offering all-inclusive rent over the last few years – but have you guessed what’s caused this trend?

It is, of course, the UK’s soaring energy rates.

High energy prices have driven both the decline in bills-inclusive tenancy agreements and, simultaneously, the number of tenants searching for these all-inclusive packages.

According to The Standard, 90% fewer tenancies were advertised as having “bills included” in July 2022 compared to January 2022. This was when we saw energy prices in the UK soar, causing many UK landlords to reconsider the feasibility of offering all-inclusive rent.

However, the good news is that Money Week predicts that there could be a big drop in energy prices in April this year, so maybe 2024 is a good year for landlords to consider reintroducing all-inclusive rental agreements. This shift could help them boost occupancy rates and provide tenants with more straightforward and hassle-free living costs.