Separating utilities, taxes. insurance from "rent"?

Question

In light of the CDC eviction moratorium for non-payment of 'rent', is there a way to segregate what is rent vs what are fixed costs like w/s/g from rent?  Speaking of multi's mostly.  In my area w/s/g is owner-paid.

For instance a $900 apt rental might break-down like this on the lease / rental agreement:

Consideration:  Rent =$800;  W/S/G= $100.  Total = $900.

If separating w/s/g is ok, how about taxes and insurance?  Take same above but rent could be $500, w/s/g $100, taxes $250 , insurance $50.  A double N lease if you will.  Fixed op costs only, provable.

We've already  moved to MTM agreements only. Holding over doesn't seem to be as protected. Because state and federal eviction moratoriums apply to non-payment of rent, how can we reduce the amount of 'rent' being charged?

Any thoughts from legal minds?  @Jerry W.  @chris K  @Ashish Acharya  Much appreciated!

Rich S. · Answer

@Steve Vaughan I'm surprised you aren't getting more traction here.  I know many investors who have switched to month to month in the past few years in order to have a bit more control over their units and to be able to nip a problem tenant quickly if needed.  It would seem your idea goes against the grain a bit, but it makes perfect sense.  I'm curious, is the primary motivation to be able to have some leverage to collect some funds during COVID or to create some accountability during a period of time when you cannot evict?

Steve Vaughan · Answer

Not existing leases, but new ones may begin to separate them out.  After hearing from others and my attorney I will do it if I can.

As you were. My rental agreements may begin doing this. I won't do leases anymore, period.

Rich S. · Answer

Great question and idea.  I'm very interested to see responses to this.

Jonathan R McLaughlin · Answer

@Steve Vaughan I think you are going to run into lots of existing and pre Covid state law roadblocks. Just for instance, you often can’t charge for utilities if they aren’t separately metered.

And relabeling this stuff usually doesn’t fly...courts use the quacks like a duck theory...if it looks like rent it’s rent, regardless of what YOU have decided to call it.

Steve Vaughan · Answer

Thanks, Bjorn.  I'll PM you what my WA attorney says if anything good. I should have time to e-mail him today.

Bjorn Ahlblad · Answer

@Steve Vaughan my experience has been that tenants have little or no idea about water and sewer, dumpster, insurance, vacancy, bad debt, even property taxes etc. I was surprised at how shocked they are when given this information!

Lots of success with this effort, Steve. Definitely going to keep up with this thread.

Steve Vaughan · Answer

Hi Rich.  I thought it might matter a little more as well.  Ya never know on here, right?

My primary motivation is to get some OP expenses covered during a moratorium. If a governor, government or governing health  entity can make a rule that we can't evict for non--payment of rent, let's reduce the amount considered 'rent'.

It will also point at the myth all rent is profit for a greedy owner's Porsche payment is false.  I think renters would be surprised that half is already spoken for.

Tanner Morrill · Answer

Does your lease say that the tenant pays for taxes and insurance specifically? If not then I doubt you could force them to pay that. I would force them to pay the utilities if the lease says they're responsible for those payments. If they don't pay the utilities then it's a violation of the lease, having nothing to do with rent, and cause for eviction. That's how I see it. A judge may not agree with me if you get sued.

Separating utilities, taxes. insurance from "rent"?

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