should utilities be counted in the total monthly rent amount?

Question

We have started to allow tenants retain utilities in our name but we have wondered whether the amount we add on for utilities should be counted as part of the monthly rent, especially for reasons of aligning with the security deposit. What's the fairest way to do that? I'm of the opinion that utilities do qualify as counting toward total rent, especially when considering the issue of when a tenant skips out. Then the security deposit, which would be equal to the base rent + utility amount would cover everything for the last month. I searched for this using Google but couldn't find this specific situation addressed in this manner.

Brandon McCombs · Answer

@Jason DiClemente how will you know the utility amount to charge for the deposit? Most  states have limits on what you can charge for a security deposit, so  keep that in mind as well.

This goes back to why I'm asking. If the utility amount can just be considered part of the rent anyway then no further distinction must be made for the situation you cited or the situation I'll cite. OH has a state law that states a deposit higher than the rent can earn interest on the difference. However we keep deposits at the rent amount to avoid this overhead. But if the utility amount can't be deemed as part of the rent then obviously we would have to ensure the deposit doesn't include the utility amount.

If we state rent is $750, utilities included, then that's still rent, plain and simple, even though utilities will differ month to month, is it not?

Brandon McCombs · Answer

Although the actual reasons don't matter ( I do understand some concerns voiced such as running up the bills), to satisfy everyone I'll state that oil and gas workers are relatively transitory. They prefer keeping things simple. So they prefer just having a single bill to pay for housing expenses and then they go back home to their families for half of each month where they and their spouse must still manage the utilities for their own home.

The utilities in question will be placed on budget (or avg monthly payment plan) anyway so month-to-month the amounts will be the same or nearly the same. Admittedly those amounts do get reviewed and updated eventually. And because the O&G workers aren't at the rental unit half the time their usage is typically lower than if a 'regular' tenant was there all the time. This will only apply to electricity and gas. We already keep water and garbage in our name because of a single water meter and the garbage service provides a discount for keeping them in our name and paying for 2 units on the same property.

I'll review our lease to ensure we can be protected in the event someone does take advantage of it. A cap may be useful to have stated in some way.

I appreciate everyone's answers and the differing opinions and information provided.

John Underwood · Answer

I would not want to keep utilities in my name. The tenant could run up the bill and then not be able to pay.

I would avoid this at all costs even if it meant installing individual meters.

Cassi Justiz · Answer

What would be the benefit of allowing the tenants to keep utilities in your name? If they don't pay their utilities, it comes back to you. If it's legal and the market will tolerate it it I would just have the tenants put the bills in their name and take the extra risk and effort off of you.

But that doesn't answer your question. So to answer your question, I wouldn't think it would be considered "rent" if you add it on or if there is a variable amount per month. You could add the average utility cost into a premium rent and do an "all bills paid" scenario with a cap. If they use over their allotted amount, then you can charge them for the extra. While you are looking into your options, you may check with someone in your area to see if fees and charges other than rent are collectable if they choose to skip out.

Sam Shueh · Answer

It only adds uncertainty. $300 water bill, $ 450 heating bill to landlord names.....

Most lenders want tenants to manage their own utilities.