House Turned Into A Duplex - One Meter - How To Charge Utilities?

Question

Hi BP,

I wanted to hear your take when it comes to charging tenants for utilities. The property is a single family home which I have turned into a duplex by splitting up the top floor and bottom floor by using a lock out. The house only has one meter, so it is hard to decipher the total amount of utilities per unit.

Details on the property: Downstairs unit is 700 square feet (2b1b) and Upstairs unit is 1400 square feet (2b2b).

I was currently thinking about not charging downstairs for utilities and having them baked into the price of rent. I was thinking of charging upstairs for the utilities, but have a percentage (formula driven) which I would take off of the total utilities for the month. My thought process is to make sure tenants are still held responsible for turning utilities off and on, while still having only one meter.

I was thinking of having a percentage formula based off of - total square feet, max occupancy per unit, and rent price. After averaging all these out I came up with a 40% credit off of all utilities for the top unit.

What are your thoughts? Anything is greatly appreciated.

Ellis San Jose · Answer

This is ripe for conflict. Unless you can run a sub-meter to isolate usage, plan on paying for it & including it in the rent.

Nathan Gesner · Answer

Include it it the rent or split it. Submeters and split meters can be expensive for you and the renter.

Many utility companies will allow you to create an "equal billing" wherein they use historical data to create an average use and you are charged the same amount every month. This makes it significantly easier to bill your tenants.

Even if they won't level out your charges, you can still create a pretty fair calculation like you've expressed above and then pass that charge on to the tenant.

Another option is to look at the average for the previous year, split it between the two units based on your calculations, and then bump the rent up. When I do that, I typically increase the charge 15% for each tenant to cover excess use. Tenants tend to squander utilities when they don't see the bills.

Nick Rutkowski · Answer

@William Davidson

I’d get it submetered then forward the bill on to the tenants. It’s much easier and cleaner for everyone if everything was separate.

House Turned Into A Duplex - One Meter - How To Charge Utilities?

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