Who pays utilities in rental units?

Question

I am in my first year of real estate and have wholesaled 1 property & recently finished a fix & flip project that is scheduled to close next week. I recently bought half a duplex and am considering keeping this one and renting. I am new to the rental market and am learning a lot by following the forums. One question I have is who typically pays for the utilities?

George P. · Answer

even if the market suggests the LL pays, I'd rather decrease the rent and have the tenant pay for utilities

Paul Timmins · Answer

A buddy told me he pays all utilities. His reasoning in the winter you want to get the rent paid. He uses incentives to lower the costs. He has an 11 unit pays 10K year to heat. Last year he got an interest free loan installing a high efficiency heating system. First year heat was not 10K but $4,300. The savings alone pays for the new system.
When he takes over a property he goes in and lowers the water pressure he says you pay twice for water coming in and leaving. Lowering the pressure cuts the gpm rate. He puts in high efficiency toilets, new shower heats and makes sure that all faucets have low flow nozzles.
It made sense to me when he explained everything.

Geoff Van Dusen · Answer

Most utilities offer a "landlord" account, so when your tenant moves out, the utility is not turned completely off (allows for cleaning and showing).  As others have mentioned, water provided by the city, if unpaid could become a lien on the property, so that one utility you may want to control yourself.  Otherwise in my rentals, the tenant has paid all other utilities.

Nathan Emmert · Answer

Here you simply put a landlord agreement in place with the utilities.  Any time the utilities would be shut off (tenant moving out or nonpayment) the utilities automatically revert to your name instead of being turned off.

If they are still in the unit and haven't paid their utilities, you'd post a remedy or quit (or whatever the form is called) and essentially treat it as an eviction.  They have 3 days to get the utilities turned back over to them or you start the process of having them removed for violating their lease.

Jeff S. · Answer

Ernie,

If the tenant pays the bill you want it in their name with the bill going to them. If water/sewer is a potential lien like it used to be in my area you want to be careful and monitor it, or have it in your name.

Check with each utility in your area and ask this question. Find out what landlords in your area typically do.

Ernie Beiler · Answer

Thanks for the the input. Hearing from active landlords is very valuable. If the tenant pays the utilities is the utility bill sent directly to them in their name? If so, how would this affect me if they quit paying the bill?

Melissa W · Answer

Whenever possible, the tenant should pay.  Some buildings have one central boiler/furnace for the heat and hot water and those have to have the heat included.

If someone has to have the utilities included it frequently means they owe the utility company a lot of money and if you rent to them they will soon owe you a lot of money.

People also will be wasteful with utilities they don't pay for.  They crank the heat or AC with the windows open and leave it on when they are not there.

My area has a lot of duplexes with heat included and separate electric.  On a lot of the ones I manage we have blocked off the vents to one unit and put in electric baseboard heat with individual thermostats for each room so that both units can pay their own heat.

Brian K. · Answer

Tenant pays all utilities, but I will pay the water and trash bill if needed because that stays with the house if not paid.  I agree with Kyle see what others are doing in your local area.

Jeff S. · Answer

If the water is $100 per mo I could reduce the rent by $100 on one unit and have them assume the water bill. Any increases would be added to the other tenants rent the following year. Haven't done it, just considering.

Have had problems in the past when the bill is shared because one accuses the other of wasting water. This is possible with the 1/3 plan.

Chris Masons · Answer

Chris,

Have you considered splitting it 3 ways? Youpay 1/3 and the 2 tenants pay 1/3.

Breaking it up 3 ways should reduce the amount paid by yourself and at the same time is more then fair for two tenants as each tenant will only be paying 1/3.

I have done this in the past with gas (heat bills) I have since seperated the heat so each tenant pays their own. I still pay the cold water in all my buildings. The average bill I have gotten in my fourplex is around 100 bucks which is reasonable.

regards,
chris

Who pays utilities in rental units?

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