I DECLARE: No Landlords should pay for their Tenants' Water !

18 Replies

I am going out on a limb here, and stating emphatically that NO LANDLORD should EVER pay for their Tenants Water Usage. Do you agree?

Here are my reasons:

1.) Personal Accountability: They use it, THEY should pay for it. Landlords don't typically pay for their Tenants' Cooking Gas, Internet, Cable TV, Landline-Phone, Cell-Phone, Electricity, Heating Oil or Gas.... Why should they pay for Water?

2.) Waste: Tenants (Humans, actually) simply don't VALUE what they don't pay for. We used to have a unit where Electricity was 'included' in rent and not broken out. Tenants left lights / AC / heat on all day and racked up crazy bills. Then we got fed up and insisted they pay for it themselves... guess what? Their usage plummeted suddenly. Renters use ungodly, copious, wasteful amounts of things they aren't paying for

3.) Environmental: As a corollary to point 2 above, when Tenants pay their own way, they use MUCH less. This is WAY better for the environment. The less electricity, gas, oil & clean water used the better for ALL of us! Water especially is incredibly expensive to filter & clean and the processing itself expends an incredible amount of Energy

4.) INCREASED NOI: This one's a no Brainer: Lower Expenses for you = More Profit / Cash for you.

EASY RUBS Billing: Before you state that it's complicated b/c Water isnt usually separately metered: No problem. Just apply the RUBS Utility/Water billing system (To anyone who doesn't know what it is, just Google it.) Essentially, you bill each Unit a % of the Building's Water Bill based on Occupancy. If you have 100 Occupants in your Building (Say spread out over 40 units) then each Unit gets billed according to the number of occupants in their Unit. If Unit 1 has 3 Occupants, they pay 3/100ths of the Bill that Quarter. If Unit 2 has 2 Occupants on the Lease, they pay 2/100ths and so on. Easy Right?

This method is 100% legal in most States (Check in your State to be sure) and as long as it's clearly stipulated and agreed-to in your Leases, it's perfectly ok. (We do it, and it's fine!)

SO WHY DO LANDLORDS PAY FOR THEIR TENANT'S WATER AGAIN?

Because in our city if the tenant doesn't pay it it becomes the landlords responsibility. At least if its my company's name it gets paid and doesn't become a lien against the property. Which I disagree with their tactic of doing this, but we go along. We also do student rentals and include everything inlcuding cable and do very well with this. Would you rather have $500 per house or $500 per bedroom?? I will gladly pay there bill.

Actually, the way we do it is we pay the actual bill, so it always gets paid on time. Then we just add each pro-rata share to our Tenants' next month's bills as Added-Rent due.

It's never been an issue and they always pay it but if push ever came to shove, we wouldn't hesitate for a second to withhold any amounts due from Security Deposits. FWIW, we always send each unit a copy of the building's full water bill plus a brief paragraph explaining the math involved in calculating their share. It's very straight forward.

As I mentioned earlier, we make sure that Tenants agree in their Lease that they are to be responsible for all utilities including water, so it's all up-front & Kosher.


What do you all think?

I see a problem in the logic of #2. If they know they're just going to pay a certain percentage of the total building's bill, then they still won't have motivation to use less. They may use 5/100 of the water but only get billed for 2/100 if there are only 2 occupants. They use all they want, and make their neighbors pay for it. This is why communism doesn't work, and never will.

Also, what about water used for common areas, such as laundry rooms or landscaping irrigation? Shouldn't that usage be broken out so tenants don't pay for that (since it's part of the property maintenance)? Or is the thought that, since the tenants are the ones "enjoying" those common areas, they should pay for the water for them too?

While I agree on principal that tenants should pay for all the utilities they use, I think separate meters are really the only true "fair" way to do it. If the water is metered separately, then absolutely, have the tenants pay it.

I charge my tenants on a common water meter a flat fee for water. It gets written into the lease and I don't have to do the brain damage of sending, collecting prorate payments for water. Takes too much time.

On my SFH tenants must put the water in their name. I get an email copy of the bill from the water company each month so I know if they don't pay. BTW water is also lienable her but I'm rolling the dice because I get good tenants. Again, backbilling or paying myself just takes my time.

Medium rre 1to1 small sizeBill S., Reliant Real Estate, Inc. | 720 207‑8190

Some water bills are billed quarterly (ours in Milwaukee are) and some tenants have trouble budgeting to pay one larger bill once every three months. So I've been starting to do a system where a tenant pays a portion of their water bill every month (e.g. $25 or $50) then each quarter when the bill comes the tenant "settles up". It's kind of like a budget billing plan. I always pay the bill directly and the tenants pay me. This way they don't just let the bill slide hoping I won't notice.

In the past I've always paid the water bill and other than one exception, I've never been burned. But I want to change my ways which is why I've gone to implementing a new system.

Dawn Anastasi, Core Properties, LLC | http://www.coreprop.biz | Podcast Guest on Show #29

Brooklyn R.,

I've always paid for the water bill on my multi-units however, because the property (ies) or units for that matter were not separately metered and more importantly the area (within my city) in general typically paid for the tenant's water. Which in essence, makes it difficult to pass that cost onto the tenant when your competition is paying for their H20.

It was almost the same for collecting last month's rent. It is not common, however, it was applicable when dealing with someone who may have had rental history or credit issues.

Now I will say, my friend pays for gas & water in the manner you have outlined (in your post) in their current apartment complex. She gets upset because she doesn't use very much gas and water as it is just her. So her bill fluctuates monthly because of the other tenants usage with her building.

I actually like Bill S.'s idea and suggestion. I may have to try that as well. At the minimum, even if they go over on the bill, I am not incurring the brunt of the cost 100%. Good idea Bill!!!

In the past I was very proactive in my unit inspections. That was after I learned that one of my tenants had a slow running toilet which sent my bill for one month from an average of $125 per month to close to $600. When I asked her if she had a leak or running water, she said, "Oh yeah, it 's been running like the past month... I meant to tell you."

I was young and dumb. Plus she was on an existing contract that was not really well written from the previous owner. Needless to say, I learned my lesson quick.

PS: My daughter's name is Brooklyn, so you got my vote regardless.

LOL.

Just my two pesos.

Big Henry

I have a multifamily with a well. I am a little hard pressed to see how to bill the water. There is a cost to it, electric for the well and the pump as well as drilling should there be an issue with capacity however it isn't really a water bill.

I pay the water for all of my 40 rental properties. They are all multifamily and there is no way to bill the tenants individually. I do charge tenants for excessive usage if I get a high bill and then go in and determine the tenant is responsible or they didn't report a large problem in a timely manner. I just charge enough rent to cover the water. I agree with absolutely everything you said in a single family property situation.

As an FYI, our buildings are MF and not separately metered. We struggled for a long time about how to handle the outrageous water bills. Just 1 constantly running toilet can easily cost an additional $1,000 per month. Tenants rarely report these. (Why? They dont care! It doesnt cost them, after all) We looked at installing sub-meters but it simply was too complicated.

After we learned about the simplicity of the R.U.B.S water billing system, we fell in love! Its so easy & straight forward! No up front costs, no hassle.

To any Tenant who might complain that they didn't use much water that month (or that they were away a lot) we say: You pay for your Cable TV each month whether you use it or not. Water is no different, except that its way more important than TV.

RE: Common areas / Billing. After calculating each unit's % (we use a fillable spreadsheet - It takes 5 mins) we always deduct 10% for posterity. This way they can never complain that we are overbooking them. We have no lawn or grass to water and there really is no common water usage but if there were, we might take up to 12 or 14% of the bill and pass on the rest.

I guess I wanted to write this post to let other Landlords know that even if there are not separate water meters or sub-meters in your MF, you can still offload water to Tenants via R.U.B.S.

Guaranteed, they will use way less water so its a win-win for all: Tenants(lower water bills), Landlords(higher NOI) and the Environment.

I don't think a landlord should pay any utilities for a tenant. That's called a subsidized lifestyle and I'm not in business to let my tenants take 1 hour hot showers. Understandably, multi units typically have one water meter and that runs with the territory, but on a house, fugget about it!

@Dawn Anastasi

AS a lender I learned this one the hard way.. I was one of the first HML into and out of Detroit Circa 2003 to 2006.. Well I ended up with 3 OREO.s and when I finally got through the foreclosure process low and behold the water bills had not been paid in years.. One water bill on one property was 5500.00. ON the west coast this would have been extinguished with my trustee's sale.. but no not in WAYNE county the land of ultra coordinated and sophisticated real estate transactions and government... Its the only market in the country were I loaned that we needed GAP title insurance because the court house and government employees were so inept that it took not days but weeks to record debt instruments IE my loans..I know there are those that make a go of Wayne county but there are so many other easier areas in the country.. Its just un real how the tenants just abuse the system

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

Preach it! Some cities as mentioned above make it to where it's easier to just pay the bill or bill them for it (in cases where it's billed to you quarterly), but I agree, I've never seen people use more water than tenants who aren't paying their water bill.

We do not pay any utilities including lawn care. We pass everything onto our tenants. We do check any unpaid bills and take it out of their security before returning it. Our security deposits are $1400-$1700 so that plenty.

@Brooklyn R. - thanks for the declaration! I just got a quote for individual water meters on a 168-unit and it was going to cost over 700k. Clearly not going to make my money back fast enough to justify the cost. But the RUBS program is the back-up option. Although, as mentioned in this thread, I wonder about the complexity of getting it set up and running smoothly.

Medium logo1Joe Fairless, Best Real Estate Investing Advice Ever | http://www.apartmentsyndication.com | Podcast Guest on Show #227

Joe - One thing's for sure: Setting up your RUBS will be a hell of a lot easier/better/faster/cheaper/less complex than installing sub-meters.

PM me and ill send you a link to a spreadsheet you can use to do it yourself or, better yet, with 168 units you can simply outsource the billing to a 3rd party. It's super cheap

IF it is stated in the lease that a Landlord is to pay certain utilities then by all means if thats the agreement then the landlord needs to keep his or her word. 

BUT if there is not any meters to regulate each and every individual unit/apt etc then how does a tenant know they are being charged for the correct usage of a specific utility ? This is not lawful to over charge and or willy nilly a bill to any person on any level of business.

Even if the lease is changed to a specific utility to be now paid by the tenant then there definitely needs to be meters to show individual usage.

Not sure why my complex is on a boiler system but the lease always stated they pay for gas and water due to the system they have. After 9 yrs of living in the same complex I am now being told I have to pay gas and water, which I have no issue with as long as the landlord and or management company installs meters for each utility and I am not charged for the usage on the maintaining of the entire complex. The grass etc is not properly kept and up until last month the water usage was all over the place. The waste had gone on for years.

I assume that now, in California, they are leaning more than ever on water waste due to the never ending drought issue. I also assume companies are being cited for wasting water like this property has. This has been a huge issues for years now.

So I dont have an issue with landlords charging for utilities. If its stated in the lease then it would be up to the potential tenants to agree. Otherwise tenants should not complain. 

But in this case there is a potential claim where the landlord will be made to pay until the meters are put in. There is also a potential claim for fraud if the landlord is charging tenants improper amounts without showing a tenant a bill or average which is the silliest way of charging someone without meters unless its otherwise stated in the lease.

If one tenant is charged 20 dollars and the next door tenant is being charged 10 dollars I would wonder how they got that amount without a metered value !

@Christine G.

Well, what we do, which works very well, is:

  • Send to every tenant a copy of the entire building's Water Bill. We do this in the interest of full transparency. 
  • Then, we shave off 10% just for good measure. ( & so we can never be accused of over-charging)
  • Then, we split up the bill pro-rata based on the number of official occupants in each apt. (Other ways of accomplishing the same thing is to split up the bill based simply on each unit's  % of overall building square-footage) As long as they are able to do basic math, they will be able to see that they are only being charged their pro-rata amount.
  • Then we add these amounts to each tenant's Rent bill as "Added-Rent" for which they are fully expected to pay. And they do. Each month without any complaint. They use it, so why shouldn't they pay for it? Make sense, right? (we don't pay for their cable or internet bill either)

It's been tremendously successful and we've never ever had a problem (nor do we expect to ever have one.)  That fact that each tenant is responsible for paying all of their own utilities is in fact explicitly stated in their Leases.

And, as a side note, I will add that after we implemented this system we observed that the building's water consumption dropped by 40%!!!! 

So I guess it trully is a Win-Win for everybody:  

  1. 1.) Tenant's are assured to not be over-charged.  
  2. 2.)Landlord off-loads the extra expense, and 
  3. 3.) Environment is better preserved!

We love Win-Wins!