Central heating conversion

5 Replies

Hi,

I'm looking into a rental (13 units) where heating is paid for by the owner (central heating furnace). Tenants pay for their own electricity otherwise. I'm looking for tips on how to make it so each tenant would pay for their own heating. Anyone from Montreal / Quebec has experience doing this?

Salut Philippe,

2 possibilités:

  • Prends ta facture de chauffage et divise la par le nombre d'unités (fait un pro rata par pieds carrés). Tu recharge ainsi ta facture aux locataires. Ça devra être spécifié dans tes baux.
  • Changer le mode de chauffage pour le mettre à l'électricité. Plus couteux, mais aussi plus "juste" pour les locataires qui paient ainsi leur juste part. Même chose... tu devras faire le changement dans tes baux.

Peu importe la manière choisie, ça va chialer... mais c'est très payant de le faire.

You are adding costs to your tenants so they will complain.  Central heating pro-rated will lead to headaches as you will often find yourself either over or short depending on the cold or warm winter. Would you want to vary the cost as well or flatline it to the tenants? Again, headache!

The way I have seen it done is to add electric heaters in each unit as they become available. Costly but on July 1 events you can generally do quite a few in one shot+ you negotiate with each tenant and add your heaters as you go. I would check with regie DB and see what previous conversion cases have ruled, you might have a nice surprise but each time I have seen this done, people kick fight and argue since you're adding costs. 

Good luck and keep us updated!

Hey Phil! Be careful with the advice you are getting as it's not that simple. First off, you need to figure out if the electric panel in each unit has the necessary capacity for you to had electric baseboard heating. Then, you need to figure out the cost to convert the whole building to electricity and determine by how much you'll decrease your energy expenses in order to make sure you have a positive ROI. If you don't, then don't bother doing it. Then, you cannot simply send the bill to the tenants, or split it amongst them and wait for them to pay, it's not that simple. The law says you have to decrease their rent by an amount equal to the expenses that will be added. In other words, if you estimate that heating will cost them $60/month, you'll have to decrease their rent by $60/month which will offset the whole thing and create absolutely no gain. However, nothing stops you from taking verbal agreements with your tenants ;)! This is the way to go. I've done it on multiple buildings, and what worked best for us was offering a free month of rent in exchange for them to take on the heating. You just need to sign a new lease accordingly and bingo. Hope this helps!

Thanks for all the feedback guys. 

The deal I was looking at ended up not looking too interesting when I got the economic value number from the banks so I won't be going forward with this one.