There are a couple of reasons a home owner might switch to solar power. Of course, there are the environmental benefits. But for many it’s the potential financial benefits, such as government rebate solar and incentives, that lure them into making the change. At the present time, 9% of Australian houses have installed solar panels and, as we move into a renewable energy future, this number is bound to rise. However, for some landlords and tenants in NSW, the switch to solar has thrown an added complication into the rental process.
Under the NSW Government’s ‘Solar Bonus Scheme’ (SBS), the owners of eligible solar power generators installed before 30 June 2012 received payments of up to 60c per kilowatt hour of solar energy they produced. Although the scheme is now closed to new applicants, it continues to help many home owners achieve significant savings on power, making the switch to solar energy a very worthwhile investment.
But what happens if the owner of the solar powered property decides to put that property on the rental market? Are they still entitled to the benefits of their investment flowing from the SBS? Understandably, many landlords would hope that they can continue to get these bonus payments while their tenants pay the electricity bill. But, depending on the rental agreement, this may not be the case.
Under a standard Residential Tenancy Agreement, the electricity is paid for by the tenant under an electricity account in the tenant’s name. Unfortunately for Landlords, payments from the SBS go to the person whose name is on the energy bill, which in this case is the tenant. Adding to the landlord’s woes, under the SBS, when the name on the electricity account changes, the payments decrease to the minimum 20c per KW hour. For some landlords this is a third of what they might have been earning from the scheme previously. In other words, if you opt for a standard form residential tenancy agreement, you’ll lose your bonus payments.
So, if you are a landlord in this position, looking to hold on to your SBS payments, you are left with these two possible options:
1. You could amend your tenancy agreement to include electricity usage in the rental price of your property, meaning it is up to you to enter a contract for the supply of electricity to the property. However, this is fraught with dangers because, if you set your rent too low, there is the chance that the tenants will use way more electricity than you factored in to the rental price leaving you well out of pocket. On the other hand, if you set the rent too high to avoid this scenario, you may price yourself out of the market.
2. Alternatively, you could bill your tenants separately for electricity and keep the bonus payments for your solar panels, but only if such an arrangement was agreed upon in the lease. The Electricity Supply Act 1995 (NSW) provides in section 72 that Landlords may impose a charge for electricity supplied to a tenant if the supply is measured by a separate meter and the charge imposed does not exceed the market price of electricity at the time or an amount prescribed by the Regulations. It would appear that this is the best option for NSW landlords.
Solar rebate schemes come and go on a regular basis, and it can be a real challenge keeping up with the changes. Whilst we used the NSW SBS as an example, there may well be lessons here for similar schemes across Australia. At the end of the day, what’s written in the residential tenancy agreement (the lease) is what matters most.
If landlords want to continue to receive benefits from solar rebate schemes, then you may need to make a few changes to your lease agreement regarding who’s going to pay the power bills. But, before you do, you may wish to consider whether it is worth the hassle. After all, if you pass on the benefits of your move toward solar power to your tenants, it may be a real draw card for your rental property in an increasingly environmentally conscious property market.