The oil companies gleefully promise record heating oil and natural gas prices this winter. Those can present a serious problem both to landlords who include heat in the rent and to landlords whose tenants pay their own utilities. Here’s why.
If you pay for heat, especially if the heat comes from oil or natural gas, your bottom line could end up below zero. But you knew that already. The solution is to raise the rent to recover, at least in part, the increased costs.
The challenge comes if your tenants are on a lease. In that case you cannot raise the rent until the term of the lease is up, even in your bank account is hemorrhaging. Conservation measures are appropriate. That could include making sure outside doors stay closed, patching up weatherstripping, adding insulation, and other things you already know to do.
Even though you cannot raise the rent during the term of a lease, you have at least two options in preparation for the end of the lease term.
One is submetering. Run the numbers. Find out what it would cost to submeter each unit so tenants can be billed separately by the gas or heating oil company. If it would pay for itself in a reasonable length of time, it is something to consider.
The second is adding a clause in your new lease, the one that will take effect when the current one expires, that permits a surcharge for the costs of heating their units when prices go up. The clause might read: “Landlord may raise the rent on 30-days’ notice to reflect the actual increase in the cost of providing heat if those costs increase 10 percent or more from the same period the previous year.”
That would mean you are simply passing through the increased expenses of heating the building. It should be perfectly legal to include such a clause in your lease agreement. Check with your attorney to be sure of your rights and responsibilities in your state.
For residents on a month-to-month tenancy you can increase the rent to reflect the increase in heating costs with a 30-day notice, or whatever notice is required in your state.
The other issue arises with tenants who pay their own heating costs. The United States Fire Administration reports that in 2002 there were 3,300 fatal fires in the United States, resulting in 3,380 deaths and another 25,100 were injured as the result of fire. About 1.7 million fires are reported each year, while many others go unreported. Direct loss due to fires is estimated at $11.8 billion.
While arson and smoking are the leading causes of home fires in the U.S., coming in second is a combination of heating, open flame and “other heat.” Heating fires are a much larger problem in single-family homes and small plexes than they are in apartments, mostly because the heating systems in apartments are usually better maintained. The use of alternative heating sources adds an entire new dimension to the circumstances, though.
Tenants will use wood stoves, fireplaces, space heaters, kerosene heaters, and the oven of the range to try to heat their home more cheaply. Each has its own safety issues. Especially dangerous are wood stoves, fireplaces and kerosene heaters. Improper use of wood stoves and fireplaces results in fires. Using kerosene heaters can result in carbon monoxide poisoning. Some people even light a barbeque inside. They are not for cooking indoors. Using barbeques for heating has on more than one occasion caused the death of the residents of the home from carbon monoxide poisoning.
You know the importance of smoke alarms, and all of your properties undoubtedly have them as required by law. The United States Fire Association reports that over 42 percent of residential fires and 63 percent of residential-fire fatalities occur in homes with no or non-working smoke alarms.
If smoke alarms are hard wired, you don’t have to do anything about them. You need only be concerned that they have a battery backup in case of power failure. Those batteries need to be changed once a year.
The battery-operated variety requires additional attention, though. The old battery-operated kind uses a battery that can be used in things such as radios and answering machines. We all know that the continued operation of those devices must be far more important than having a working smoke alarm, considering that tenants remove batteries from the smoke alarm to use in their portable radios and answering machines. That means we as landlords need to be eternally vigilant in checking to see that all smoke alarms are in working order.
Count on it being “your fault” if there is a fire in one of your properties and the smoke alarm didn’t work because the tenant removed the battery. That would hold true even if you have a smoke alarm agreement and the tenant acknowledged that the alarm was in good working order when he or she moved in.
With natural gas and heating oil prices going up this winter and the supply of heating oil in question, we all need to take action right now to see that our tenants do not put themselves, other tenants and our properties in danger.