Incidental expenses: how to fix them?

15 february 2021 - "I own a flat that I want to rent. I was wondering whether I should charge my tenant separately for heating and hot water, and if so, how to set them. Do I also have to provide for a deposit, an advance payment or a flat rate? ». Anne Hiltpold, CGI Conseils lawyer, answers to Grégoire G., Geneva.

Incidental expenses: how to fix them?

The law provides that ancillary costs can only be charged to the hirer if this has been specifically agreed in the contract. Incidental costs are understood to mean, for example, heating and hot water costs, public taxes resulting from the use of the property (sewage or refuse disposal charges) or other operating costs (caretaker's fees, charges for cable television, electricity, gas or air conditioning or the costs of operating the lift).

However, the law does not oblige the landlord to charge these costs separately to the tenant, and the landlord may decide to include them in the rent. This is known as "rent including charges". In this case, the rent implicitly covers all incidental costs, including heating and hot water.

If, on the other hand, the landlord intends to make the tenant bear these incidental costs, the lease contract must contain a specific clause so that the tenant can understand what items will be charged in addition to the rent.

The landlord may invoice these incidental costs in several ways. First of all, the landlord can agree with the tenant that the latter will pay the ancillary costs invoices directly to third parties. This is very often the case in practice in the case of single-family homes, where the tenant himself orders and pays for his heating oil and maintains the boiler or other installations by entering into maintenance contracts with specialist companies. In flats, the tenant also pays the electricity directly to the supplier. If individual heating and/or hot water installations exist, the tenant will also pay the related bills directly to third parties.

It is also possible to provide in the tenancy agreement that the tenant will pay a monthly lump sum to cover the usual ancillary costs. This amount must be fixed in advance and cannot be changed during the course of the lease. However, at the end of the lease, the lessor may increase the amount of the lump sum by means of an official notice of increase. This system may be unfavourable to one or other of the parties, depending on whether the total ancillary costs are higher or lower than the amount of the lump sum. At a time when the price of energy and water tends to vary greatly, this system is little applied. The advantage of this system is that the landlord does not have to provide the tenant with an annual statement of ancillary costs.

In the majority of cases, ancillary costs are invoiced in the form of instalments, commonly known as provisions for charges (the terms "instalments" or "provisions" actually mean the same thing). The tenant generally pays a deposit each month, the amount of which is set out in the lease contract, and then a statement is made at the end of the year or at the end of the heating period. The actual cost of incidental expenses borne by the lessor will be compared with the down payments made by the lessee and the difference will be subject to an additional balance to be paid by the lessee, in the event that the down payments made are less than the total cost. In the opposite case, it is the landlord who will have to reimburse the tenant for the amount paid in excess. A statement of account must of course be drawn up and communicated to the Tenant each year.

At the time of signature of the contract, the lessor is not obliged to inform the tenant of the ratio between the amount of the advance payments and that of the last annual statement of charges. Thus, if the amount of the provisions has been set well below the actual amount, the tenant must nevertheless pay the significant balance at the end of the financial year. It is nevertheless recommended that you try to set the amount of the deposit as closely as possible, in order to avoid unpleasant surprises on both sides. The amount of the instalments may be revised upwards, for the contractual deadline, but always by sending an official notice of increase within the legal deadlines.

To answer your questions, you do not have to charge your tenant separately for heating and hot water, but you can include them in the rent, which will be "charges included". This solution, like the flat-rate solution, has the advantage that you do not have to draw up an annual statement, but it does not allow you to review the rent or the amount of the flat-rate without any other. Given the possible fluctuations in energy prices, I think it would be more appropriate to make the tenant bear the actual cost of the heating and hot water charges and ask him to pay you a monthly retainer. The tenant will then pay you a deposit, but you should make a statement each year. As a precaution, it is also worth remembering in the contract that the electricity will be at the tenant's expense and paid directly by the tenant to the supplier.

It is of course not possible for me to tell you precisely what the amount of the deposit will be in the contract. You will have to base your decision on the last statement of your heating and hot water charges in order to provide a deposit that is as close as possible to the actual cost, which will then be invoiced to the tenant. However, even if the deposit is too low, you cannot be held responsible for this and your tenant will have to pay the balance, based on a statement that you will have to provide yourself. The amount of this deposit could then be readjusted in accordance with legal requirements (an official form will be sent), which will undoubtedly be in the tenant's interest.

by Anne HILTPOLD, Lawyer CGI Conseils

For any further information, CGI Conseils is available in the morning from 8:30 am to 11:30 am on tel. 022 715 02 10 or by appointment.