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.
Few employees have more of an impact on the day-to-day operations of your business than your office manager. Whether it’s scheduling travel arrangements, ordering supplies or planning a birthday party, your office manager touches every part of your business. And while he or she genuinely appreciates the occasional meeting “shoutout” or $50 gift card, what your office manager really wants are tools to make their job easier. Office automation tools to the rescue. These apps and online services will have them getting more done with less effort.
Employee Scheduling Apps
Many companies now offer employees the option to work from home or a more flexible work schedule. That’s great for the employees, but keeping track of these hybrid schedules has made it harder on your office manager. Workforce management tools like Robin let office managers control and track which employees require office access and what resources they need. Management platforms take the burden off the office manager’s hands by automating the process, letting employees book their own desks and rooms when needed.
Project Management Software
Office managers wear many hats and manage many projects, and keeping up is a daunting task. Make it easier by getting your office manager some handy project management software. These helpful online tools not only let users track the progress of multiple projects, they also allow collaboration with project team members. PM apps like Trello or Asana are good options, but there are many more out there. Both apps have freemium pricing plans, which puts limits on features like the number of collaborators, but managers at least get to try them out at no cost..
Social Media Management
Does your office manager oversee all your social media pages? Then they need a social media management platform. Apps like Hootsuite are great for managing multiple accounts at once like Facebook, Instagram and Twitter while others like Tailwind work well for specific platforms. With most apps, you can schedule posts, create ads and run analytics on your traffic. Some even alert you when someone mentions your company online. Social management apps are low cost and well worth the time saved.
Travel Planning Software
Even travel bookings and management are a part of today’s automated office. And with lockdowns and flight cancelations a regular hurdle, it helps to have a tool to manage last minute changes. Apps like TravelPerk or TripActions simplify travel bookings, letting your employees schedule their own flights, lodging and transport from their smartphones. Your travel data is centralized and checked, so you know exactly what’s happening at all times. Plus, most travel apps integrate with your expense account software, which streamlines the approval process. Look for time-saving features like platform AI that reschedules canceled or delayed flights automatically. These apps cut down planning time while improving transparency between managers and employees.
Automated Employee Gifting
Any office manager will tell you that recognizing birthdays, new babies and working anniversaries take time to plan and execute. But you can offload that task with employee gifting services like Evabot or Gifted.co. These services make sending employee gifts as simple as a few mouse clicks, and, like most automated platforms, they help manage and centralize all your purchases into one place. So, you’re making your CFO happy too! Employee recognition helps you retain valuable employees, so it’s a critical part of your business. But saying “Thank you!” doesn’t have to include the cost of your manager’s time.
After-Hours AC Automation
When your employees need to schedule after-hours electricity or HVAC on the weekends, it’s likely your office manager’s job to record and schedule it with your landlord—just another spreadsheet they need to manage. Apps like 7NOX automate utility scheduling by letting employees book their own after-hours air conditioning via their mobile phone. The app also cuts down on billing errors by accurately recording each booking’s date, time and duration. No more misunderstandings with your facilities manager or disputed charges. Plus, your office manager can trash their spreadsheet.
