Prepaid Sub-Meters - Should you be offering these to your South African landlords?

Landlords and property managers all know the hassles and risks involved in revenue collections for utilities usage by tenants. Constant increases in utilities costs and legislative changes enforcing that ownership of the utility bill with the municipality remains with the landlord result in the increased risk of unpaid bills.

This potential risk and the administrative nightmare can be avoided with prepaid sub-metering solutions which ensure that tenants pay for their utilities before usage.

How does prepaid sub-metering work?

Prepaid sub-meters do not replace the council meters and are installed adjacent to the distribution board on the premises or next to the council meter.

Tenants purchase a recharge voucher to get a set amount of electricity or water which is entered into the meter. The voucher is generated at a specific tariff rate provided by the landlord. When the meter credit runs low it alerts the tenant that it needs to purchase more vouchers, failing which, the utilities will be suspended until an additional voucher is purchased.

Recharge vouchers can conveniently be purchased via a network of vendors, by EFT, through direct deposit or from an ATM.

Funds gathered via the vending platform are typically paid over to the landlord on a monthly basis, enabling them to settle the council account.

What costs are involved?

Generally, the landlord pays for the meter and its installation and the tenant is charged an administrative fee by the vending platform provider on each purchase.

The administrative fee is deducted from the recharge amount prior to generating a voucher and covers the costs that are associated with the gateway fees such as: SMS fees, , transmission charges, cash deposit fees, banking fees etc,

What are the benefits to landlords?

• No collection hassles as utilities are prepaid by tenants
• No arrears issues
• No tenant disputes as utilities are on a pay-per-use basis
• No need to take additional deposits from tenants in order to protect against non-payment
• Ability to implement vending blocks in case of non-payment of rent

What are the benefits to letting agents?

Prepayment for utilities by tenants results in a significant reduction in the administrative overhead associated with account reconciliation and billing.

Letting agents who are currently involved in utilities management for clients have improved real time reporting about what’s happening on the premises and hence better control by partnering with a prepaid metering company.

Source: www.idealprepaid.co.za

Courtesy: The EAAB - Estate Agency Affairs Board

“Redressing the Past, Building the Future and Guiding the Real Estate Business towards Professionalism”