Can a property management company charge me extra for utilities?

Question

I own some rentals in Indianapolis and recently found out that my PM is charging 15% extra on my electric bills.  Is that even legal?

Mark Jones · Answer

We also require the tenant to put the utilities in their name before they get the keys.  When the home becomes vacant, we will call and get the utilities switched back into the owner's name until the home is rented again.  We pay the bill for the owner and it is put on their monthly owner's statement.  We don't charge extra on top of the utility bill when we do this.  It is just included in our management fee.  Try to keep the billing simple and also less headache for the owner.  Since you are hiring a management company to take away the headaches of managing the property, this would be one that you would not want to deal with!

Kim Meredith Hampton · Answer

@Mag Chan Depends on what your management agreement spells out. Some do charge extra to pay utilities, HOA, taxes, insurance etc….

Phillip Austin · Answer

Markups for things like utilities, HOA dues, property taxes, insurance, and even 3rd party contracted maintenance are starting to become way more popular. But, it should be explicitly stated in your management agreement. Read it carefully.

Also, ask your PM if they are marking up any other expenses. You may be surprised at other things you missed in the mgmt agreement.

To answer your question whether it is even legal, it all depends on your state/local laws. In most states, yes, it is legal as long as such mark ups are explicitly written and agreed to in the mgmt agreement.

Bill B. · Answer

They may be charging you for the labor of paying the utility bills. Why wouldn’t you put the utilities in your own name and sign up for auto payment? (Through the utility or your bank.) Seems like an easy way to save money.

Will Fraser · Answer

We've seen the same thing WAY TOO OFTEN!  This is why we exhort owners to let us handle the utility coordination.  It does come at a price, yet I find that what we are hired to do is to allow our owners to redeploy their time into HIGHER VALUE, which is exactly what dickering with utility companies is NOT.

Bill B. · Answer

When you talk to the utility companies ask if they have a “landlord option/policy/made up name” thing you can sign up for. In Las Vegas I can have the utilities automatically switch back in to my name when tenant leaves. Then new tenant switches to their name before they get keys. For me it means rehabbers have water and power, and the gas comes any doesn’t have to come out and confirm working appliances before turning gas on. For MN it means the heat/gas stays on. Pipes don’t freeze.

Mag Chan · Answer

You guys are right.  I reread the terms and it's true that they are charging that fee for handling utilities.  I just didn't have that in mind and somehow thought that utilities cannot be overcharged by law.  I am an out-of-state investor, so I didn't have a second thought about handling the bills after the tenant vacates.  I will handle the utility bills from now on. Thank you all for the precious comments and advice!

Drew Sygit · Answer

@Mag Chan what does your contract state?

This is what happens when you don't take the time to understand how PMC's work and read everything!

They are charging you for their time to handle utilities and corresponding bills. A flat fee would be more appropriate UNLESS they are putting utilities in their name instead of yours.

You could try to negotiate a flat fee with them if you keep the utilities in your name (only when vacant), but have sent to them to process & pay.

Eliott Elias · Answer

Are they paying for your electric directly? What does your agreement say?

Jake Knight · Answer

This is very common in our market, it's to cover the administrative cost of managing the payment each month. This is only done with us when properties are vacant or if a utility is covered.  We do allow our clients to manage that themselves if they wish to.

Can a property management company charge me extra for utilities?

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