Definition: After-hours HVAC is the delivery and maintenance of a facility’s heating and air-conditioning services, outside regular operating hours, for the benefit of a tenant. Tenants pay an hourly rate (usually specified in a lease) for any costs associated with after-hours HVAC operation. After-hour times normally include evenings, weekends and holidays.
After-hours HVAC goes by different names in different markets. For example, in the U.S. it’s sometimes referred to as “overtime HVAC.” Some landlords may use the term “after-hours air conditioning” in a lease or shorten it to “after-hours air con” or “AHAC.”
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AHAC: A Response to Changing Workplaces
Social and technological forces have changed the workplace over the last decade. Millennials are now the largest generation in the U.S. workforce. AI and automation are driving increased productivity. The Internet of Things (IoT) is fueling smart building design, and the COVID lockdown kickstarted a revolution in remote working. The standard 9-to-5 work day is behind us, replaced by hybrid schedules, teleconference meetings, and a more remote workforce.
These social and technological changes accelerated specific trends within facility management and building design. These include a move to more flexible workspaces, the integration of “smart” tech and the push for sustainable design. It is out of this demand for more work and building flexibility that services like after-hours HVAC emerged.
Today it’s commonplace in the FM industry to provide tenants with lighting and HVAC services outside of normal operating hours. In turn, firms use this flexibility to expand work hours, hold company meetings and host special events.
Charging for AHAC
Usually the first question a property owner asks is “How much do I charge?” Most tenants and/or their lease advisors insist that AHAC charges represent a reasonable estimate of the “actual cost” for providing after-hours service. But what is the actual cost of operating an HVAC system for one hour? Calculating a “reasonable” estimate is often difficult because HVAC systems are complex. In addition to electricity, they also require water, gas or oil to operate. Then there’s wear-and-tear of equipment, staffing, elevators, car parks and other costs to consider.
To keep things simple, some FMs determine a fixed rate based on the electricity, depreciation and a small percentage to cover “admin” costs. Other landlords avoid the hassle altogether and include the estimated cost within the monthly rent. While there are AHAC calculating best practices, the best approach is one that balances accuracy with simplicity.
Billing Strategies
Billing tenants for AHAC takes several forms. Most property managers start the billing cycle the day they execute the lease. AHAC hours are charged at the agreed rate and billed to the tenant if and when they make a request. Other FMs may allot a number of free overtime AC hours for the term of the lease (e.g., 300 hrs for 5 years). In that instance, an AHAC charge begins only when the tenant exceeds those cumulative free hours.
FMs can bill tenants for AHAC on a monthly, quarterly or yearly basis. After-hours HVAC charges are always billed separately from normal operating hour utility expenses to avoid double charging tenants.
Lease Stipulations
Lease stipulations are common within AHAC tenancy agreements. Some lease clauses may further define AHAC times by listing specific holidays or “dates of observation.” Other provisions set limits on tenant usage to protect the landlord against unexpected costs. For example, most property owners include a provision that allows an annual review and adjustment of AHAC rates based upon current utility costs. This is to protect the landlord against the volatility of energy prices.
To assure quality service, the majority of leases also require that tenants give a 24 or 48-hour notice. The stipulation ensures engineering staff have enough time to carry out the request. There’s also a practical reason. Every HVAC system requires a start-up time to bring the property to the standard temperature (e.g. 22°C/72°F). Notices help give the system enough lead time to ramp up. Start up times are also why landlords stipulate a minimum service time of one hour. Scheduling the HVAC system for only 30-minutes wouldn’t likely cover the actual cost of operation.
Scheduling
There are several ways to request AHAC services. Many programs have tenants create a work order or similar request via a tenant portal. Maintenance staff then program beginning and ending times along with the dates requested. The tenant then arrives at the property on the scheduled day and time.
Other properties equip each floor or tenant space with its own controls, usually a switch or button-operated interface. Occupants have control and can “order” after-hours AC or heating simply by turning the system off and on. Software then records the time and duration and charges the tenant accordingly.
Forward-looking facilities use after-hours automation software that give tenants more control of the scheduling process. Tenants make their AHAC requests through a smartphone app or web browser. The software then programs the system to operate at the desired time, date and duration. These programs cut down on staff time and increase scheduling flexibility.
If you haven’t yet automated your after-hours HVAC program or, worse, have no program at all, you’re missing out on benefits that maximise your staff productivity and cut out wasted time. Automation also helps increase tenant satisfaction and productivity, which, in the end, helps your properties thrive. Here are the biggest benefits from automating your after-hours HVAC program.
1. Easier Scheduling
The typical after-hours HVAC scheduling process usually involves several staff members and these four steps:
Tenant fills out a work request in person or on the website portal
The request is recorded on a spreadsheet
The building engineer programs the request into the HVAC system
The facility manager prepares & sends monthly billing statements for each tenant
Each step requires time and resources from your team, and when problems pop up, tasks grow exponentially. If an engineer isn’t available, another staff member has to be scheduled. When a tenant needs to schedule a change, someone must sort things. An AHAC cloud-based platform eliminates these issues by automating many of these manual steps. Here are the steps in an automated system:
Tenant makes a requests via smartphone app or desktop browser
(Automated) Recording requests entries
(Automated) Programming the HVAC system
(Automated) Sending monthly statements
Automation reclaims lost time from tending to tedious tasks. You can, instead, spend that time improving your property and tenant experience.
2. Fewer Billing Errors
By eliminating steps in your after-hours HVAC program, you stamp out inaccuracy. The best-laid plans run into the realities of everyday life. Engineers get sick. Requests are forgotten. Entries are flubbed. Statements don’t match. In contrast, automation software doesn’t lie, get ill and or forget.
The fallout from mistakes isn’t just the wasted time setting things aright. For facility managers, inaccuracy means loss of profits, and those losses can be huge.
When a billing discrepancy arises, it’s often easier to acquiesce than upset a tenant. Some managers avoid charging for after-hours at all because they fear situations like this. Where this is the case, you’re unnecessarily paying for another business’s electrical costs while shortening the life span for your HVAC equipment. The accuracy of an automated after-hours program ensures your properties stay profitable.
While AHAC automation may seem like a simple tool, its potential impact for FMs and their tenants is limited only by the lack of exploring its many applications for both.
3. Happier Tenants
Most automated after-hours platforms let tenants make reservations from a smartphone app or desktop browser. It’s a perk that benefits both managers and tenants. Tenants no longer need to waste time filling out work requests, and managers can reduce staffing costs associated with after-hours management. Since AHAC apps fully integrate with your BMS, start and stop times for HVAC service are automatically received, executed and terminated by the software. This frees your engineers and maintenance staff up to attend to higher property priorities.
Since lease holders can schedule after-hours HVAC “on demand,” this eliminates the need for an advanced notice. Most commercial leases with an after-hours clause stipulate a 24 to 48-hour advance notice from the tenant. But tenant schedules can vary wildly. Some have highly predictable office hours; others manage chaotic itineraries. For the latter, even a 24-hour notice puts them in a tight spot. But by eliminating the need for a notice, automation apps give your tenants and their employees greater work flexibility — a growing priority for workers splitting their work hours between home and office.
4. More Sustainable Properties
Going on-demand with your after-hours HVAC program conserves energy to. Changing or canceling bookings by mobile device is easy and convenient for your tenants, so they’re much more likely to cancel their after-hours appointments when things change. The upside is you won’t be heating or cooling empty properties simply because something came up at the last minute. With more accurate billing, you’ll get a better overview of your total energy use and be able to find opportunities to increase efficiency and cut waste.
Pro Tip: Identify seasonal trends for your after-hours program and use the data to make targeted improvements in lighting, insulation or renewable energy investments within specific zones of your property.
Conclusion
The benefits of after-hours HVAC automation make a strong case for its adoption among facility managers. While it frees your team from tedious tasks like reporting and billing, automation’s biggest selling point is it’s a value-add for your tenants.
Clients and their office managers can use the data collected by automation software to streamline their own internal processes. Retail tenants can use after-hours data to set sustainability benchmarks and goals. Software developers could employ after-hours usages in evaluating each team’s productivity and/or cost to a project. Law firms could recoup losses by adding their AHAC charges as a billable line item for a client.
While AHAC automation may seem like a simple tool, its potential impact for FMs and tenants is limited only by the lack of exploring its many applications for both.
Charging tenants for after-hours air conditioning (AHAC) presents many difficult questions for FMs. How do I calculate an hourly rate? How do I separate after-hours billing from normal utility OPEX? Do I have enough resources and staff? Calculating and managing after-hours HVAC is complex, and some FMs choose to forgo charging tenants to avoid the hassle. Instead, they raise “maintenance fees” or other charges to cover the extra electricity.
If this describes your situation, there’s a good chance you’re falling short of recouping the full cost of your operating expenses. Plus, you may be missing out on other “softer” benefits associated with charging for AHAC services. Here are five reasons to start an after-hours HVAC program today.
1. After-Hours kWh Are Usually Peak Load Times
Most leases list “operating hours” for the work week at 8:00 am to 6:00 pm or something similar. This leaves evenings open for tenants to schedule after-hours HVAC (along with Sundays and holidays). However, peak hours for electricity also occur in the evenings, especially in the summer months. Peak hours or on-peak times are when you’re paying the highest price per kWh to run your HVAC system. So, tenants using after-hours AC in the evenings are consuming current at a premium. Even if you’re charging a general CAM fee or “admin fee” to cover the added energy costs, it may not be enough to offset these higher peak demand prices. And if you’re not charging at all, you’re certainly cutting into your profits.
2. AHAC Charges Encourage Energy Conservation
For seasoned FMs, it’s no secret that charging pro-rata rates for electricity doesn’t encourage conservation among your tenants. Absent a green lease or submetering, tenants show less incentive to save energy with pro-rata billing. Why put in the effort to save 10% per month if the savings will be split among everyone in the building? But an effectively managed after-hours HVAC program can counter this attitude. It works like a type of sub metering. Tenants are responsible for only their share of kWh used, and they are billed as such each month or quarter. This encourages them to bring down their electrical consumption to lower operating costs.
3. New Hybrid Workspaces Demand It
As the COVID pandemic begins to subside, companies are asking remote workers to return to the office. But some employees are pushing back, instead, demanding more flexible schedules. The expectation is that many employees will split their time between home and the office. These new work approaches will broaden normal operating hours and pressure FMs to adapt. Thus, the demand for “amenities” like after-hours HVAC will become necessities. By starting your after-hours program now, you’ll make the transition easier for your staff and clients.
4. It May Improve Your NABERS Rating
If you want an accurate assessment of your property to secure a NABERS Energy and Water rating, you’ll want to include any after-hours air conditioning (AHAC) requests. To rate your building’s efficiency, a NABERS assessor needs to calculate your total rated hours. First, he or she will calculate the power consumed during normal operating hours (ex. 8:00 am to 6:00 pm). Next, the assessor will add any qualifying AHAC requests to the total. However, requests must record the date, time and space. Simply handing the assessor a spreadsheet with the “total hours run” for the year won’t work. As a result, your AHAC hours data may be skewed or not counted. Inaccurate or omitted data lowers your efficiency rating, but an after-hours HVAC program will account for every kWh.
5. It’s Easy to Automate
Just the thought of adding a separate utility billing process to their weekly tasks is enough to turn many FMs off of charging for AHAC. It’s a legitimate concern. Manual scheduling and billing programs do require staff resources, time and spreadsheets to function. However, today’s after-hours HVAC apps automate the bulk of the process, leaving you with time to focus on your properties. Tenants use a mobile app or web browser to make after-hours HVAC bookings. The app then integrates with your BMS to carry out the request. Monthly billing is also automated, so recording mistakes are minimised and time management is maximised.
If you’re new to after-hours air conditioning (AHAC), you may find it hard getting started drafting a lease or tenancy notice. AHAC is a complex topic, and each property requires a bespoke solution. However, there are a few basic terms and ideas that appear in most agreements regardless of your circumstance or location. While you should always consult a legal professional when drafting leases, the following tips and topics will help get the ball rolling.
Define “AHAC”
To start, make sure you have a clear and unambiguous definition of after-hours AC. Ensuring accuracy and clarity in your leases not only covers you legally, it helps improve tenant satisfaction. Use a term that’s common for your area. In some markets, after-hours service is referred to as “after-hours HVAC” or “overtime HVAC.” Other times a lease may only refer to it as “after-hours air con” or “AHAC” for short. With a little research, you can locate the preferred name for your situation. But regardless of the moniker used, be consistent to avoid confusing your tenants.
Next, your definition needs to set parameters for when AHAC applies. In most situations, it refers to charges incurred by any tenant who operates the air conditioning system outside of normal operating hours. Therefore, your definition must necessarily include an explanation of “normal” operating hours.
List Normal Hours of Operation
the core operating hours for a property are usually stated within the lease, but it’s a good practice to remind tenants in all your communications. Use a simple table like the following that clearly lists times and days for each floor, tenant and/or zone of the property.
Level 2
Mon-Fri
8:00 am — 6:00 pm
Saturday
8:00 am — 1:00 pm
Level 1
Mon-Fri
8:00 am — 6:00 pm
Saturday
8:00 am — 1:00 pm
Ground
Mon-Fri
9:00 am — 5:00 pm
Saturday
9:00 am — 12:00 pm
Example of table listing core operating hours.
By definition, any HVAC usage outside of normal operating hours is considered AHAC and will be charged as such to the requesting tenant. In contrast, you could list a table showing only times that fall inside the AHAC time slots, if this makes it easier to understand.
Remember to mention any specific days outside the scope of operating hours such as holidays. And if you don’t plan to make AHAC available to all parts of your property, then list those excluded areas in your lease and/or communications with tenants.
Explain Fixed Rate Calculation
Explain how you calculated the energy costs (i.e., fixed energy rate)that factored into your after-hours HVAC fee. If it was based on an average energy cost across the entire property for a specific time, then show how you prorated the amount. Maybe your energy provider calculated the hourly cost for you. If so, briefly explain how this process works. If you estimated the hourly energy based on the equipment involved, then list these HVAC assets for the tenant. Such assets might include chillers, AHUs, VAVs and FCUs.
Yes, your tenants are likely to have little interest in how air handling units work. But they will appreciate that you’ve done your due diligence in calculating the actual energy expenses for which you’re charging them. Such reassurance is beneficial when billing issues surface.
Add Excluded Costs
You may also want to list any excluded HVAC equipment or service costs. These can include anything within your fixed energy rate calculation that you’ve chosen not to include even though it’s an actual operating expense. For example, your chiller uses water for heat rejection, but it may be impractical or impossible to get an accurate measurement. Therefore, you may end up omitting water usage from the fixed rate calculation. Other omitted costs often include electricity for lighting hallways, car parks and powering elevators.
An excluded equipment and services list may seem like overkill, but it does show tenants you’ve chosen to absorb some of the costs. This can help quell future complaints about AHAC increases.
Show Tenants How to Calculate AHAC Charges
Finally, write out the actual formula for calculating the AHAC monthly charge. Examples clear up the process for your tenants. At minimum, your AHAC charge will include the following elements:
Fixed Rate x Number of Operating Hours = AHAC Charges
At this point in the lease, record the amount of the AHAC hourly charge (e.g., “$75 per hour”) Examples here are helpful too: “Tenant A used 10 hours of after-hours HVAC for the month, their total charge would be $75 x 10 = $750.”
Accelerated Depreciation
Including wear-and-tear of your HVAC equipment helps offset replacement costs for their shortened service life. If you include accelerated depreciation in your fixed energy rate or AHAC charges, add it to those sections as a line item or as part of the AHAC formula. There are many ways to recoup depreciation losses. Some property owners make depreciation a separate charge, adding the fees to a general “building fund” that goes to maintain the property as a whole. Whatever method you choose, justify your decision by pointing out that after-hours HVAC operation shortens the life-span of your equipment. You’ll need those funds for PPM and to ensure a comfortable building environment for tenants.
Fixed Rate Adjustments
Electricity costs fluctuate, and so will your fixed energy rates. To stay profitable, many firms add a 12-month fixed rate agreement to their lease. The agreement stipulates that when the year ends, the fixed rate will be reviewed and adjusted according to current market rates. Including a section in your lease that explains your rate review strategy helps tenants avoid sticker shock. Email reminders at the beginning of the year also prepare tenants for rate increases.
AHAC vs Annual Operating Expenses
Keep after-hours HVAC charges separate from your annual operating expenses. There’s the potential that AHAC kWhs are accidentally mixed with your normal end-of-year utilities bill to tenants. If this is the case, you will end up charging tenants twice for the same energy usage.
Savvy tenants will anticipate this possibility of energy “double-dipping” and want reassurance from you. Prepare for these concerns by explaining that you’ve taken measures to ensure accuracy and fairness in your billing. It’s the most effective way to avoid confusion down the road.
Conclusion
It’s clear there are many factors to consider when building an after-hours HVAC lease agreement. In the end, you can make a lease as simple or complex as you like. Your approach will ultimately be guided by how much time you want to spend vs how much energy costs you want to recoup. The more accurate your fixed rate calculation, the more research it will require. For some, the time spent figuring excluded costs may not offset the benefits of avoiding tenant complaints. But most managers will adopt an approach that prioritizes tenant satisfaction. Eating a bit of operating expenses is a small price to pay for full occupancy and happy tenants.
Scheduling after-hours AC can be an expensive and cumbersome process. It’s usually a mishmash of spreadsheets, sticky note reminders, voice mails, and impatient tenants — all trying to accomplish a task made overly complicated by a manual process. At home, we flick on the thermostat, but at work, this simple act can become a bureaucratic quagmire involving multiple team members. How can FMs and property managers cut the cost and red tape? With an after-hours automated HVAC program that puts the scheduling literally in the hands of tenants.
How Does HVAC Automation Work?
Much like customers who order on-demand movies, tenants “order” their after-hours HVAC as they need it — this could be two months prior or two hours before. Authorized tenants use an after-hours HVAC smartphone app or web browser to make their booking from anywhere at any time. The app then connects to your building’s BMS to schedule and execute the request per the specified time, date, floor and property location. The program then notifies the tenant and property manager via an email, listing the total charge based on the agreed hourly rate.
Automation Eliminates the Niggly Bits
Automation streamlines after-hours scheduling by eliminating many of the steps and hurdles of a manual process. Staff members no longer need to take and record requests via email, phone or work order. Maintenance personnel can forgo manually programming requests into the BMS. Managers can skip time consuming maintenance of spreadsheets (automated billing statements are delivered via email each month). And tenants save time filling out requests and making changes to their bookings.
Calculate The Savings
Depending on the complexity of your current program, the amount of time saved through after-hours HVAC automation could lower staffing costs for your portfolio. Let’s say you estimate each after-hours request currently takes thirty minutes to fulfill, and you complete twenty requests per month. That equals ten hours of labor cost. With an average staff wage of $30 per hour, you’re paying $300 a month just to manage after-hours bookings, and that doesn’t include your tenants’ time.
Billing Accuracy
Automation software is perfect for recording overtime air conditioning bookings because it’s highly accurate. Your team members, despite their best efforts, can become overwhelmed with other responsibilities. Mistakes happen. The wrong tenant is charged or a cancellation order is misplaced. Not only do mistakes like these create dissatisfied tenants, they often result in a loss of revenue for you. When a booking is forgotten or goes unrecorded, you’ll be eating the utility costs. When there’s a discrepancy in charges, getting payment takes more time sorting things with a (now upset) tenant. After-hours HVAC automation ensures billing speed and accuracy, helping you avoid these situations while keeping profits high.
Conclusion
After-hours billing should be a simple process, but it’s full of variables that complicate matters. Even if your manual ordering and billing is spot on, there are hundreds of situations that call for a more nuanced approach. Each tenant has different needs. While some may have predictable work schedules, others may be seasonal. Making things more complicated are the rise in hybrid workplaces and work-home schedules, which demand increased flexibility and access to facilities. Overall, FMs must take a more nuanced approach to utility billing in general. Automation prepares you for future workplaces by simplifying and streamlining your after-hours HVAC scheduling process.
