Last updated: Monday 19 October 2026 (Europe/London).
Next update: when Ofgem changes its resale rules or the government updates its Renters’ Rights Act guidance.
By: Switch Editorial Team, Switch Squid Ltd
An HMO energy fair usage policy is a clause in a bills-included tenancy that sets a yearly or monthly energy allowance per tenant and explains what happens if use goes over it. As of 19 October 2026, the rules in England are clear on the money side: any utilities included in the rent must accurately reflect your costs, and if you charge tenants for energy, Ofgem’s maximum resale price means you can’t charge more than you paid, including a fair share of the standing charge. A cap set from last year’s real usage and your current contract rates is fair, easy to explain and much easier to enforce. This SwitchSquid guide shows how to work out the cap, word the clause, handle overuse, and keep the cap realistic with a better business energy contract. We may be paid by suppliers if you take out a contract through our quote form; the quote service is free to you.
Sources: Ofgem — maximum resale price direction, Ofgem — alternative homes energy guidance, GOV.UK — fees you can charge as part of a tenancy, GOV.UK — Renters’ Rights Act overview for landlords, Citizens Advice — what your landlord can charge for energy and Management of HMOs (England) Regulations 2006, regulation 6 (all checked on 19 October 2026). This is general information for landlords in England, not legal advice.
Get an HMO energy quote
Our own business energy form: free, with no obligation, for one house or a whole portfolio
Compare fixed prices so your fair-use cap is based on rates you know for the term
Main limitation: you’ll need recent bills and meter numbers for an accurate quote
What is a fair usage policy in an HMO?
When you let rooms with bills included, you carry the risk of how much energy the house uses. One tenant running a fan heater all winter, or a dryer every day, can wipe out the margin you built into the rent. A fair usage policy, often called a fair-use clause or utility cap, shares that risk. It sets an allowance that covers normal use and says how any use above it will be charged.
A good policy does three things. It tells tenants what normal looks like, it gives you a fair way to recover costs for genuinely heavy use, and it protects tenants from arbitrary bills by tying any charge to what you actually pay.
Who pays the utility bills in an HMO?
It depends on the tenancy. There are three common set-ups:
Bills included in the rent: you hold the energy account and the rent covers energy. GOV.UK says included utilities must be listed as terms in the tenancy agreement and must be an accurate reflection of costs.
Recharged separately: you hold the account and charge tenants for what they use, usually through room sub-meters. Ofgem’s maximum resale price applies, so you can’t make a profit on the energy.
Tenants pay the supplier: on a whole-house let, tenants may take the account in their own names. You then don’t need a fair-use policy at all.
Most HMOs let by the room use the first option, which is where fair-use clauses come in. GOV.UK confirms that a payment towards utility bills is one of the payments a landlord is allowed to take under the Tenant Fees Act. For the communal side of the house, such as hallway lighting and shared laundry, see our guide to landlord communal electricity supplies.
What the law says about charging for energy
Ofgem’s maximum resale price direction applies whenever gas or electricity from a licensed supplier is resold for domestic use, including by landlords to tenants. Each unit can be resold for no more than the reseller paid, and the standing charge must be shared pro rata. Where there are no meters, the charge must be estimated so that, over a period of no more than a year, the landlord recovers no more than their cost. Tenants who are overcharged can take it to the civil courts to recover the difference.
Ofgem’s guidance adds that these resale rules don’t apply where energy costs are simply included in the rent. But GOV.UK says included utilities must still reflect your actual costs, and once you bill a tenant for use above a cap, that charge is a resale of energy. The safe approach is simple: charge any overuse at your own unit rate, show your workings, and keep your bills.
Citizens Advice also reminds tenants that a landlord must pass on any energy support they receive and that VAT on household energy is 5%, with no VAT on electricity bills from 1 October 2026 to 31 March 2027. If your HMO is on a business contract, your VAT position may differ; our HMO landlords energy page explains when a business or household contract applies.
How to set a fair-use cap: a worked example
Base the cap on your own house, not on national averages. You need last year’s total usage from your bills, your current unit rates and standing charges, and the number of rooms. The figures below are an example only, so replace them with your own.
Step | What to use | Example figures |
|---|---|---|
1. Last year’s usage | Total kWh from 12 months of bills | 11,000 kWh electricity, 16,000 kWh gas |
2. Current rates | Unit rates and standing charges on your new contract | Electricity 24p/kWh and 60p a day; gas 6.5p/kWh and 35p a day |
3. Yearly cost | kWh × unit rate, plus 365 × standing charge | £2,859.00 electricity + £1,167.75 gas = £4,026.75 |
4. Share per room | Divide by the number of rooms and by 12 | £4,026.75 ÷ 5 rooms ÷ 12 = £67.11 a month |
5. Add headroom | A margin for a cold winter, so normal use never triggers a charge | +15% = a cap of about £77.18 a month per room |
The headroom matters. A cap set exactly at last year’s average will be breached by half the tenants in a cold month, which leads to arguments. A margin of 10% to 20% keeps the clause for genuinely heavy use. Review the figure whenever your contract rates change, because a cap set on old prices can become unfair in either direction.
If your HMO has room sub-meters, you can set the allowance in kWh rather than pounds, which is fairer when prices move. Our HMO sub-metering and recharging guide explains how to share standing charges and read meters at each tenancy change.
Lock in the rates behind your cap
A fixed business energy contract means the rates in your cap stay the same for the term
Tell us your contract end date, so you can compare prices before you roll onto higher rates
Main limitation: fixed contracts can carry exit fees, so check the term before you sign
How to word a fair usage clause
Keep the clause short, specific and tied to cost. A clear clause usually covers:
The allowance: the monthly or yearly amount per tenant, in pounds or kWh, and the period it’s measured over. Measuring quarterly or yearly smooths out cold weeks.
How usage is measured: room sub-meters, or a fair split of the main meter if there are none.
The overuse charge: any charge for use above the allowance is at the unit rate you pay your supplier, with no mark-up.
Evidence: you will show the relevant bill and meter readings on request.
Review: the allowance is reviewed when your contract rates change, with written notice.
From 1 May 2026, tenancies in England are assured periodic tenancies, and any utilities included in the rent must be listed as terms in the agreement. Have your clause checked by a qualified adviser or your landlord association before you use it.
Handling overuse fairly
Most disputes come from surprise bills. A few habits prevent them:
Share usage early: send a short update each quarter showing the house’s usage against the allowance.
Warn before charging: if a tenant is running well over, tell them and suggest simple changes, such as drying clothes on a rack rather than in the dryer.
Charge at cost: bill only the units above the allowance, at your own unit rate, with the meter readings and bill attached.
Be consistent: apply the same rule to every tenant, and record what you charged and why.
Can a landlord control the heating in an HMO?
You can set up the heating sensibly, but you can’t use it to cut tenants off. The Management of Houses in Multiple Occupation (England) Regulations 2006 say the manager must not unreasonably cause the gas or electricity supply used by any occupier to be interrupted. Excess cold is also one of the hazards councils assess under the Housing Health and Safety Rating System.
In practice, many landlords use timers, thermostats with sensible limits, or smart heating controls for shared central heating, and leave tenants able to heat their rooms properly. Explain the settings in writing at the start of the tenancy. A fair-use cap is a better way to manage cost than switching the heating off.
What are the new rules for HMOs in the UK?
In England, the Renters’ Rights Act changes came into effect on 1 May 2026. GOV.UK says all assured shorthold tenancies became assured periodic tenancies with no end date, section 21 “no fault” evictions were abolished, and rent can only be increased once a year using Form 4A with at least two months’ notice. Landlords with written tenancies had to give tenants the government’s information sheet by 31 May 2026. There is also a new possession ground for student HMOs let on joint contracts.
For energy, the key points are unchanged: bills included in rent must be listed in the tenancy and reflect your real costs, and you can’t profit from reselling energy. Scotland and Wales have their own rules, so check with your local council. Our business energy for landlords guide covers void periods and contract types.
How a cheaper contract keeps the cap realistic
A fair-use cap only works if the rate behind it is reasonable. If your fixed contract finishes and the house rolls onto out-of-contract or deemed rates, your costs can jump overnight, and either your margin or the cap has to give. Put your contract end date in your diary and get quotes a few months before it.
What we need for a quote:
Your electricity MPAN and gas MPRN (on your bills)
Your current supplier and contract end date
Annual usage in kWh for each meter
The property address and number of lettable rooms
Whether the supply is for communal areas, the whole house, or both
Our verdict
A fair usage policy is worth having on every bills-included HMO, as long as it’s built on your own figures, charged at cost and explained clearly. Set the cap from last year’s usage and your current rates, add sensible headroom, review it when prices change, and fix your contract so the numbers hold. That keeps tenants onside and your margin intact.
Compare HMO business energy prices
Free quote for one HMO or a whole portfolio
Have your MPAN, MPRN, contract end date and annual kWh ready
Main limitation: the best prices depend on your usage and contract timing
Frequently asked questions
What is an HMO energy fair usage policy?
It is a clause in a bills-included tenancy that sets an energy allowance per tenant and explains how use above it is charged. It protects the landlord from very heavy use and protects tenants by tying any extra charge to the landlord’s real cost. It should be written into the tenancy agreement.
Can a landlord charge tenants for using too much energy?
Yes, if the tenancy agreement says so, but only at cost. Ofgem’s maximum resale price means a landlord can’t charge more per unit than they paid their supplier, plus a fair share of the standing charge. Keep bills and meter readings so you can show how the charge was worked out.
Who pays the utility bills in an HMO?
Usually the landlord, when rooms are let with bills included. Tenants may pay the supplier directly on a whole-house let, or the landlord may recharge them using sub-meters. Whatever the set-up, GOV.UK says included utilities must be listed in the tenancy and reflect actual costs.
How do I work out a fair-use cap?
Take last year’s total kWh from your bills, multiply by your current unit rates, add a year of standing charges, then divide by the number of rooms and by 12. Add a margin of 10% to 20% so normal use in a cold month doesn’t trigger a charge. Review the figure whenever your contract rates change.
Can a landlord control the heating in an HMO?
A landlord can set timers and sensible thermostat limits on shared heating, but must not unreasonably interrupt the gas or electricity supply tenants use, under the HMO management regulations for England. Councils also assess excess cold as a housing hazard. Explain the heating settings in writing.
What are the new rules for HMOs in England?
Since 1 May 2026, tenancies in England are assured periodic tenancies with no end date, section 21 evictions have been abolished and rent can rise only once a year with two months’ notice on Form 4A. Bills included in rent must still be listed in the agreement and reflect real costs.
Does an HMO need a business energy contract?
It depends on how the supply is used. Landlord-controlled communal supplies are often on business contracts, while rooms recharged to tenants may be treated as domestic. Ask the supplier or a broker before signing, and check the VAT that applies.
Questions about switching? Ask Squid AI
Squid AI explains the price cap, tariffs and switching in plain English, then points you to the comparison.
- Save energy and moneyLearn when a fixed deal beats the price cap.
- Save timeAnswers in seconds, no forms or sign-up.
- Plain answersNo jargon, no sales calls, free to use.
