Solar Power on a rental - how to charge?

[golli]

I'd like to get feedback from you all on renting out what was my PPOR with a 1.5kw solar system, to tenants.

This system was installed prior to the QLD government axing the 44c feed in tariff so it still receives the maximum amount per kw, however if I rent the property out and the tenants set up a new electricity account then this 44c feed in is lost forever, defaulting to the current 8c kw feed in. So I have 2 options here:

1) Cancel my electricity account and let the tenant do their thing - which would result in them receiving the minimum benefit

2) Keep the account in my name (perfectly legal) and have the PM charge the tenants accordingly for the full cost of the electricity bill, just as they would with the water bill - which would allow the tenant to receive the 44c feed in.

The pro to option 2 is that I could slightly increase the weekly rent, the con being I am responsible for the electricity bill should the tenant not pay.

Would love some feedback from experienced investors as to what you would do in this situation and what safeguards you'd write into the agreement if you were to go with opt 2.

 

[Mitch1]

Seems easier to leave it in your name, though I would possibly think about increasing bond by 2 weeks, as the lease agreement obviously doesn't cover bills in your name.

Also, would the 'income' from the solar refund have to be declared?

Haven't heard much on what to do tenant wise in these situations!

 

[golli]

Mitch I did think about the income aspect of the solar, however being such a small system (1.5kw) it is not large enough to actually put an electricity account in credit as any credit generated will only be enough to offset maybe 50 - 70% of actual consumption.

Having said that, I wonder if a utility bill in my name would then be tax deductable at the EOY even if paid by the tenant?

Good point about the bond.

 

[Mitch1]

If you are charging usage (as you would with water) using the usage charges on the bill, and power usage charges are documented in the lease so that you can legally charge for this, this would be additional income IMO.

The income is reduced to you in this area because of the credits I assume, but you are gaining it back in the increased rent? Which is also declared.

My GUESS would be that you could claim back the cost of the power bill because you are also declaring the income portion that the tenant is charged for. But I honestly do not know.

And I suspect it is a little more complicated than my own assumption! Hopefully someone with the smarts here will comment and give real clarity!

 

[Perp]

You can't just decide to charge an increased bond; that's illegal.

I'd definitely keep the account in your name to keep the 44c feed-in tariff. (At least for now... )

If the tenant pays the electricity bill by reimbursing you, you either declare both the money they pay for you for reimbursement, and claim the bill, or you just get the tenant to pay the electricity company directly and keep the ATO out of it. Either way, it makes no difference to your taxable income. Income = deduction - no tax benefit or cost.

With regard to protecting yourself from their electricity bill default, I would check with your PM if you can include a clause that the tenant's responsible for electricity bills and that any amount unpaid at the end of the tenancy comes out of the bond. (Noting again that you can't increase the bond, though.)

Make sure you check regularly on the status of the bill so that you don't get a credit hit based on their non-payment. Or pay it yourself and seek reimbursement, but then you have to declare receipt and expense to ATO. (Probably worth it.)

 

[Mitch1]

Thanks Perp, didn't know that was illegal here, my bad! We were charged additional bond when we rented so assumed it was allowed, just googled and it was apparently because our rent was above $700...

 

[Perp]

Thanks Perp, didn't know that was illegal here, my bad! We were charged additional bond when we rented so assumed it was allowed, just googled and it was apparently because our rent was above $700...

Ah, yes, forgot to mention that - all bets are off if rent > $700 pw!

 

[golli]

Perp, great response. Thanks for your input.

 

[marg4000]

Not sure how you go about it, but you will need to arrange an official meter reading at the beginning and end of each tenancy to ensure you are passing on correct charges.
Marg

 

[D.T.]

Way too much trouble. Why bother with these pennies?

 

[MichaelGilbert]

Id take a reading of the elec meter at the start of the tenancy and put the meter reading in the lease with the special condition saying the tenant must reimburse you. Get the tenant to initial this special condition so they are 100% fully aware.

If find the tenants don't pay you, cancel your account and they'll have to create their own one.

At the end of the tenancy you'll have to manually calculate what they owe in electricity. How much they have used (since last bill) times it by the rate.

We use to do this all time for water (in NSW) and only sometimes for electricity.

 

[golli]

Way too much trouble. Why bother with these pennies?

Well I am looking at this with a view to find and keep a good tenant. If I can offer a good tenant a significantly lower power bill then they will be likely to stay in my property. Good tenant + rent stability = <me.

 

[wylie]

Unless you may live in the house again one day I wouldn't bother with all this fiddling about for a 1.5 system. I wouldn't think a tenant will pay over market rent for such a set-up.

 

[NicoleS]

Solar

We have managed a few properties in Brisbane with the 44c feed in and initially had problems because there was no clear legislation on who should receive the rebate. The tenants believed that because they were generating the power to enable rebate that they were entitled to it, the owner believed that they were entitled to the rebate because they paid for the solar system. We have now worked out issues and have a few owners who charge the electricity as they do the water, the owner pays (account in their name)and we send out account to tenant for useage ( you cannot charge for reading) as it breaches legislation. Then we have some owners who divided the rebate up and allow the tenant 9c out of their 44c which is what the tenant would get if they had account in their name. Note you have to leave the account on in the owners name to retain the 44c rebate. As long as it is stated in the lease that the electricity bill is to remain in the owners name and that the tenant is responsible non payment by the tenant could result in them being breached and costs can be recouped from bond. Solar syystems are becoming so common in Brisbane now that they are like a dishwasher or air con and do not add alot of extra value to rent.

 

[golli]

Thanks for the insight Nicole.

 

[carl.w]

Solar syystems are becoming so common in Brisbane now that they are like a dishwasher or air con and do not add alot of extra value to rent.

don't want this to sound like canned ham but thought i'd pitch in with something that i found which has solved this problem for many who have invested in solar on a rental

- install a pay as you go meter to the property -

in a nutshell electricity account stays in your name you collect tariffs pay for usage- tenant pays only for the electricity they use like a prepaid mobile- so no nasty debt collection notices filling the mailbox- electricity that the tenant uses during the day is generated by the solar but they're paying you for this priveledge ..pm me for details..

 

[mrsdawnrazor]

don't want this to sound like canned ham but thought i'd pitch in with something that i found which has solved this problem for many who have invested in solar on a rental

- install a pay as you go meter to the property -

in a nutshell electricity account stays in your name you collect tariffs pay for usage- tenant pays only for the electricity they use like a prepaid mobile- so no nasty debt collection notices filling the mailbox- electricity that the tenant uses during the day is generated by the solar but they're paying you for this priveledge ..pm me for details..

My Nan had one of these in her council house in the UK - Lots of fun time searching for coins in the dark because she forgot to top it up! I guess they are a bit more sophisticated these days

 

[Dazz]

Solar systems are becoming so common in Brisbane now that they are like a dishwasher or air con and do not add alot of extra value to rent.

You obviously haven't been doing your homework on Somersoft.

There are threads just recently regarding all of these things and posters swear they can charge extra for these things. $ 10 pw extra for a dishwasher and $ 20 pw extra for an A/C.....it all adds up.

I'd add $ 30 pw extra for a small solar system and see how you go. You'll be flooded with calls....not.

Tenant's aren't stupid, and will not pay extra for anything, whatever you have in the property will be considered a bonus and they'll take it all and then some.

To the OP...seriously, concentrate on the steak, not the peas. It doesn't all add up.

Choose option 1. It'll assist the Qld Govt's finances at the same time. You'll be doing your bit for the community.

 

[wylie]

There are threads just recently regarding all of these things and posters swear they can charge extra for these things. $ 10 pw extra for a dishwasher and $ 20 pw extra for an A/C.....it all adds up.

I'd add $ 30 pw extra for a small solar system and see how you go. You'll be flooded with calls....not.

Tenant's aren't stupid, and will not pay extra for anything, whatever you have in the property will be considered a bonus and they'll take it all and then some.

Actually... that is fact. We've done that on several houses. Generally, we have a tenant leave, add a dishwasher and put the rent up more than we would have had we not added a brand new dishwasher.

However, we've also added it for sitting tenants and asked $20 extra, and got it. Same tenant was happy to pay $50 for a deck, but we've put that on hold as we will be moving the house over if we can get approval to build in the back.

Tenants are not stupid, but they do know what they want, and are happy to pay to either have it added post-signing the lease, or they are comparing my house to others and my house without a dishwasher or air-con is going to sit longer than a similar quality house without those things.

You might not agree, but that is the way it is.

 

[Dazz]

See, told ya Nicole, you haven't been doing your homework....the lesson has been repeated above for your edification.

Start making notes Nicole.