Investor · Philadelphia, PA · Member since 2015 · 172 posts · 58 votes
How do you get the utilities like electricity and gas charged directly to the tenants instead of building it into the rent? I used to live in apartments and I paid the utilities directly without having to go through the landlord. One apartment I lived at I paid the management companies. But either way, how does it work? Are there meters to determine utility usage and if so, how does that work in terms of getting the utility charges sent directly to the tenants instead of through me, or at least the exact amounts sent to management so management can charge them?
Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
6y
@Ben Feder, utilities have meters and accounts. If it's a single-family unit, it's simple; one electric meter, one account--the tenants.
On multi-family buildings it can get complicated. For example, a 6-family building needs 7 electric meters. One for each apartment so the tenant pays their own, and a 'house' or common-area meter that is the owner's responsibility.
If there are no separate meters, it is problematic to submeter (although it sometimes can be done), or the owner must pay all.
Keep in mind, it is a major problem if an electric company finds an owner 'co-mingling' common area electric on the meter of a tenant, in other words having the tenant pay for exterior lights or common hallway lighting that should be on the landlord meter.
Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
6y
@Ben Feder, utilities have meters and accounts. If it's a single-family unit, it's simple; one electric meter, one account--the tenants.
On multi-family buildings it can get complicated. For example, a 6-family building needs 7 electric meters. One for each apartment so the tenant pays their own, and a 'house' or common-area meter that is the owner's responsibility.
If there are no separate meters, it is problematic to submeter (although it sometimes can be done), or the owner must pay all.
Keep in mind, it is a major problem if an electric company finds an owner 'co-mingling' common area electric on the meter of a tenant, in other words having the tenant pay for exterior lights or common hallway lighting that should be on the landlord meter.
@Ben Feder, utilities have meters and accounts. If it's a single-family unit, it's simple; one electric meter, one account--the tenants.
On multi-family buildings it can get complicated. For example, a 6-family building needs 7 electric meters. One for each apartment so the tenant pays their own, and a 'house' or common-area meter that is the owner's responsibility.
If there are no separate meters, it is problematic to submeter (although it sometimes can be done), or the owner must pay all.
Keep in mind, it is a major problem if an electric company finds an owner 'co-mingling' common area electric on the meter of a tenant, in other words having the tenant pay for exterior lights or common hallway lighting that should be on the landlord meter.
That's a no-no that could cost you lots.
That's great but how do you setup the meters and have the bills go directly to the tenants instead of to me?
If you have meters per tenant unit.....then put language in your lease that mandates that the utilities are paid by the tenant and have to be switched within three days of move in, or preferably before. It is their responsibility to contact each utility and set up. There will be a deposit they have to put up possibly to each utility. State that possibility in the same lease clause and explain that to them while they are a prospect all the time looking them in eyes. All utility language in the lease should be margin initialed after you cover that set of clauses while explaining the lease during signature day. This is an extra defense in the event that non-payment of utilities become a breach action (ie. eviction)
In my area, I have utilities that set up landlord accounts....which means I get copies of each month's bill per utility, per meter. If a tenant is falling behind, that's a good indication they're creeping up on missing a rent payment.
Without separate meters, no separate billing will be done for you and you're SOL.
FYI, a good lesson about contracts, which I gained over forty plus years of managing with them, writing them, administering them and all the etc. that goes with that.......follow the rule of three....1. tell them what you're going to tell them. 2. tell them. 3. tell them what you told them.
Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
6y
Simply put - the tenant has to set-up utility service in his/her name. The owner will discontinue utilities on day 1 of the lease and the tenant is to have the utilities placed in their name - with proof to the owner - starting that day.
I prefer this over doing a third party billing arrangement. It puts the responsibility squarely on the tenant who is consuming those services - and eliminates any billing disputes.
If the units have separate electric meters, it's simple to have the tenants put the account in their names.
If the units do NOT have separate meters, you can get your electrician to install new service entry panels, trace all wiring and make sure the apartments have no co-mingled circuits.
It will only cost $2--5K per, depending on your location and contractors and amount of rewiring they have to do.
If it is a single unit or one meter per unit, the utility company bills the tenant directly. Simply have the tenant call and set up the billing in their name...call and confirm that they did it.
My opinion, you are chasing a $5 with a $20 by trying to split the utilities into individual metered service.
If you start to put electric panels into a property, you have to run service from the street for each new panel. Gas meters have to be installed by the gas company, and if your service isn't large enough for more than the one meter already installed, then the service pipe would have to be dug up and sized according to their formula, split into feeders, and then the channel filled back in. Water, the same deal. Then, how are people to enjoy their unit while this is going on since it doesn't happen on one day.
It's easier to load the rent. If this is property you haven't any experience with, then.....each utility should be able to give you a 13 month usage if the building only had one meter for each of the services. Use that as your guide and give each a 10% lift and put it in the rent. Adjust annually as needed.
Investor · Philadelphia, PA · Member since 2015 · 172 posts · 58 votes
6y
@Ola Dantis Thanks! If the tenants call to set it up then, how is it physically set up? Are there meters set up for each unit pre-installed or do they have to be set up also?
Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
6y
@Ben Feder - is this a hypothetical question? If not, then you should be aware how many meters and what type you have for your building. Tenants are generally used to setting up utilities in their names if there are seperate meters for each unit.
If there is just the one meter for the entire building you can charge the tenants for the utility. Looks up RUBS - which is a method of allocating utility costs.
I do want to comment on the LL that gets copies of his tenantsbills - i cant imagine thatis legal - seems to me that is a huge breech of privacy
Investor · Philadelphia, PA · Member since 2015 · 172 posts · 58 votes
6y
@Mary Mitchell yes I an wondering what is involved with the meters. If the building only has one meter do the other meters need to be installed, and if so, by who? I would like each unit to have it's own meter so everything can be setup and completed by the tenants rather than allocating costs after the charge comes to me.
Investor · TX · Member since 2019 · 8 posts · 2 votes
6y
@Marc Winter Thank you for your reply, I knew about separate meters and how to set them up but I had no idea why there is always an extra meter. Just today I was looking at a 4 unit place that had 5 meters, makes much more sense now
I do want to comment on the LL that gets copies of his tenantsbills - i cant imagine thatis legal - seems to me that is a huge breech of privacy
Utility bills are public information in my area. We commonly ask city hall for the last 12 months utilities for houses we are considering buying, or if we want the info for potential tenants when turning a unit.