Rising energy price cap: what the July increase means for landlords and tenants

The energy price cap going up again is one of those events that most landlords can ignore. Until they can't.

If your tenants pay their own bills, this is largely their problem. But if you run all-inclusive lets, HMOs, or any arrangement where utilities sit in your name, the July increase lands directly on your P&L. No buffer, no pass-through mechanism — just higher bills.

Here is what to think through now, before the increase hits.

Who actually absorbs this

The exposure depends entirely on how your tenancy is structured.

In a standard assured shorthold tenancy where the tenant holds the utility accounts, the price cap rise is their concern. Your job is done at the point of handing over the keys.

The picture changes sharply in three common scenarios:

• All-inclusive rentals — where a fixed monthly rent covers energy, water, and sometimes broadband. The landlord absorbs every unit of consumption at the new rate.
• HMOs with communal billing — where the landlord pays the master meter and recharges (formally or informally) to tenants. The recharge mechanism often lags behind actual costs, or was never calibrated to begin with.
• Short-term and serviced accommodation — where bills are always the operator's problem, and occupancy patterns make consumption hard to predict.

If you are in any of these categories, the July increase is not an abstract headline. It is a cost you will carry.

The all-inclusive problem

All-inclusive rents feel like a competitive advantage — until energy prices move.

The appeal is real. Tenants prefer the simplicity, and landlords can often justify a modest premium. But the model has a structural flaw: your income is fixed, and your costs are not.

When you set an all-inclusive rent, you were implicitly betting on energy prices staying roughly where they were. Every cap increase since 2021 has tested that bet. The July rise tests it again.

The question worth asking is whether your current all-inclusive rent still reflects actual running costs — or whether you have been quietly subsidising your tenants' energy use for the past year or two.

Reviewing your tenancy terms

Most tenancy agreements are vague about what happens when utility costs rise. That vagueness is now expensive.

Some landlords include a clause allowing them to adjust the all-inclusive element of rent in line with energy price changes. Many do not. If yours does not, your options mid-tenancy are limited: you can absorb the cost, negotiate informally with the tenant, or wait until renewal to reprice.

None of those options are great. The practical response for renewals coming up is to:

• Audit what you are actually spending on energy per property, per quarter
• Compare that against what your all-inclusive rent assumes
• Either reprice, or introduce a usage cap above which the tenant is liable

Usage caps — sometimes called "fair usage" clauses — are increasingly common in all-inclusive agreements. They set a ceiling on the energy consumption the rent covers, with anything above billed to the tenant. They require careful drafting, but they shift the structural risk in a way that a flat all-inclusive rent cannot.

Sub-metering in HMOs

If you are running an HMO on a master meter, sub-metering is the most direct way to reconnect tenants to the cost of their consumption.

Sub-metering means installing individual meters (or smart sub-meters) so each room or unit has its own measured consumption. You can then recharge tenants based on actual use rather than a rough estimate or a fixed weekly amount.

The upfront cost is real. So is the admin. But it removes the situation where one tenant's 24-hour heating habit is effectively subsidised by everyone else — including you.

It also changes the conversation at rent review. Instead of arguing about whether your all-inclusive rent is fair, you have actual data.

Worth noting: any recharging arrangement needs to comply with the Electricity Act and Ofgem's resale rules. You cannot charge tenants more per unit than you pay yourself. This is not a grey area — it is a hard rule, and it catches landlords out.

The EPC angle

Energy efficiency is not just a compliance issue — it is a direct cost lever.

A property with a poor EPC rating costs more to heat. In an all-inclusive let, that inefficiency comes out of your margin. The July cap increase makes the arithmetic worse.

The government's trajectory on minimum EPC standards for the private rented sector has been stop-start, but the direction has not changed. Properties will need to meet a minimum rating to be legally let. The question is when, not whether.

Landlords who have been deferring EPC improvements are now facing a situation where the financial case for acting is getting stronger even before any regulatory deadline. Insulation, draught-proofing, and heating system upgrades reduce consumption — which means lower bills regardless of where the cap sits.

If you have an all-inclusive let in a poorly-rated property, the combination of a rising cap and a future efficiency requirement makes the case for improvement fairly hard to ignore.

What to do before July

The window between now and the July increase is short, but it is enough to take a few concrete steps.

A practical checklist:

1. Identify your exposed properties. Which lets are all-inclusive? Which HMOs are on master meters? List them.

2. Pull your last four quarters of energy bills. Understand what you are actually spending, not what you assumed when you set the rent.

3. Check your tenancy agreements. Do they include any mechanism to adjust for energy cost changes? If renewals are coming up, what do you want to change?

4. Model the gap. If the cap rises and your rent stays flat, what does that cost you per property per month? It may be manageable. It may not be.

5. Talk to your agent. If you work with a letting agent, they should be across this. If they are not flagging it, ask them directly.

6. Consider the EPC position. If a property is poorly rated and all-inclusive, it is worth getting a current assessment before deciding whether to upgrade or reprice.

None of this requires a crisis response. It requires treating energy costs as a line item that needs active management — which, for most of the last decade, landlords have not had to do.

The broader picture

The July increase does not exist in isolation. Energy markets remain volatile, and the geopolitical factors driving that volatility have not resolved. A cap that rises in July can rise again in October.

Landlords who build energy cost exposure into their financial modelling now will be better positioned than those who treat each cap announcement as a surprise.

The structural question for anyone running all-inclusive lets is whether that model still makes sense at current energy prices — or whether the premium it commands is now smaller than the risk it carries.

That is worth working out before the next bill arrives.