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In light of an impending 60% tariff hike in the electricity price, property owners are rapidly adopting privately owned, secondary, prepaid electricity metering solutions to help curb utility revenue collection risks on rentals.
In addition to collection of rent, landlords also have to collect revenues from tenants for utilities consumed. Unlike rental, which is due on a given date, utility collection is problematic in that utility bills are only available to landlords in the month following that in which the utilities were consumed by the tenant.
This means landlords must collect money for electricity and water in arrears, which exposes the landlord to the risk of having to collect required amounts before the bill is due to be paid to the municipality. In practice, this situation presents a risk to the landlord where the tenant may dispute the billed amounts with the landlord, or not pay as required.
To avoid this situation, many landlords have turned to privately
owned, secondary, Prepaid Electricity Metering solutions to help
prevent this risk. These meters do not replace the existing municipal
meter on a property and are installed inside the dwelling alongside the
main distribution board. They serve to implement a system whereby
tenants pre-pay the landlord in advance for electricity and so avoid
the risk of non-payment for electricity by the tenant.
Electricity bills can be substantial but are traditionally higher
during the Winter months when people start using electrical heaters in
an effort to stave off the cold and Geysers start drawing more
electricity as they cool down more frequently. Non-payment by a tenant
in these times can mean a substantial loss to landlords, who often rely
on rentals for extra income or to cover mortgage payments.
The risk associated with non-payment for electricity will be
dramatically increased in the event that electricity prices are
increased by the proposed 60%. Aware of this, an increasing number of
Landlords are opting for the prepaid solution to avoid the associated
financial risk of not doing so.
“Since the announcement that Eskom wants to increase the price of
electricity by 60%, we have seen a marked increase in sales to
landlords.” says Sean Wheller of PrePaidMeters.co.za.
While primary prepaid metering solutions are available from
municipalities, obtaining a municipal solution is often a long and
inefficient process. In majority of cases the municipal route can also
be more costly than the price of buying and installing a secondary
prepaid meter.
Municipalities are also willing to install only one prepaid meter
per erf, which is a problem for landlords with multiple tenant dwelling
units or Granny flats. A similar type of problem is also found in
sectional title schemes where the building or complex is fitted with a
single bulk meter, and resident billing is calculated based on a
participation quota.
When compared with the municipal, primary meter option, from the
perspective of a Landlord, the privately owned, secondary, prepaid
solution has a number of advantages. In addition to being easily
purchased and installed at a lesser cost, the privately owned nature of
the secondary prepaid meter means that the Landlord not only remains in
control of the utility management on the property, but experiences an
improvement in cash flow and elimination of the risk of loss associated
with non-payment of electricity.
As electricity prices and other costs increase, the trend towards
prepaid solutions seems to be gaining momentum as landlords strive for
better management of the traditional risks associated with rentals.
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