New to Real Estate · Pittsburgh · Member since 2019 · 10 posts · 2 votes
I have a single family home, currently housing two adults on a month to month lease. Since the house was originally seen by the tenants on Airbnb, we ended up doing a formal lease and off of the Airbnb platform, due to longevity of stay. We negotiated to include the utilities in their rent. However, we (my parents and I are the owners) noticed that they are using the HVAC in excess and using what appears to be unnecessary electric (TVs and lights remain on even when not in use and air conditioner is running constantly). They also purchased a window-unit air conditioner (the house has central air conditioning already) which my dad saw when doing yard work; otherwise, we were not made aware of this addition.
My question is whether or not it makes sense to make an addendum to the lease, stating that we will cover upwards of $100 (for example) for the electric bill, and the remainder will be added on to their next month's rent. Certainly, we have learned from this experience and plan to put electric in the tenant's names in the future!
Thank you for any input you may have for a rookie landlord!
Property Manager · San Diego, CA · Member since 2020 · 45 posts · 37 votes
6y
I would look at past utility bills and then create an addendum that states utilities are included if under a certain amount. So if all utilities total up to $300 or something, those are included, but if utilities exceed $300 per month, the extra charges will be passed on to the tenants. In my opinion, it might be better to just re-do the lease so that it doesn't include utilities. That may mean lowering the rent a bit, but then the utilities will all be in the tenants' names. @Brian Van Pelt mentioned asking politely, which is also a good idea. But like he mentioned, they'll likely say no or have a negative reaction.
Real Estate Agent · Houston, TX · Member since 2017 · 290 posts · 233 votes
6y
Wait.. if this is a Month to Month... just do an addendum as mentioned above, to an agreed upon amount, or they are out.
You're right to learn a lesson from this a correct it, because getting an extra $50 or so a month due to your previously negotiated agreement, won't be worth it in the long run if your A/C goes out in just a few years from heavy abuse
New to Real Estate · Pittsburgh · Member since 2019 · 10 posts · 2 votes
6y
@Ethan Jacobsen, thank you so much. That is such a good point of having one set "covered" amount for utilities. I haven't been liking the unknown of what I will see when I log on to that bank account. Thank you!
New to Real Estate · Pittsburgh · Member since 2019 · 10 posts · 2 votes
6y
@James De Stefano, thank you so much. That is such a great point. I really should have seen this coming with having all utilities covered, but I do think I will addend the lease agreement and will know much better for future tenants!
Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
6y
We just had the same happen. We were asked by our neighbors if we would rent our FL home for a couple of months as their home was severely damaged due to a water line break. They were away 10 days (stranded by Covid) so it was a lot of damage. We agreed verbally to an amount. BUT I just got the electric bill for June & it was double what we normally have as & we run the a/c etc all year.
So I just text them this morning & asked for 50% of the electric billing for last month & again for July when it comes due. No problem they said, it's been hot & we like it cool.
New to Real Estate · Pittsburgh · Member since 2019 · 10 posts · 2 votes
6y
@Pat L., that is so helpful - I'm glad it was as easy as asking nicely and having very reasonable tenants in that situation! Thank you so much for sharing.
Rental Property Investor · San Diego, CA · Member since 2008 · 89 posts · 65 votes
6y
@Jennifer Maiolo I am going to run into this issue as well and researching options to meter separate circuits for energy use and either bill it back or contain a certain not to exceed amount in the lease. I am sure they should work with you unless you have unreasonable tenants.
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
6y
I never include electric in my lease for this reason. Everyone has a different comfort zone for temperature, so if they want it cold, they can pay for it. Utility bills also have a tendency to encourage conservation, turning lights off, shorter showers, etc.
Being on the other side of the equation, when I was younger I rented apartments that had utilities included. I knew those costs were variable and I didn't want to deal with huge bills.
In this case, I would try to get them off AirBNB and sign a direct month to month lease that requires them to pay water, electric and heat. If they are going to be there a while, the more traditional lease agreement makes more sense. You could also just talk to them and ask them nicely to be more careful, so you don't need to increase their rent.
The other thing to consider here is what your lease amount is versus standard long term lease amounts. For example if you are charging $3000 a month and standard leases are getting $1000 with tenant paying utilities, odds are good you are still better off with your high lease amount. My point is figure out if you are really getting a bad deal when you consider the premium you are charging over long term rentals in the area.
The other thing to consider is that utilities will likely be higher for long term occupants than for short term. Short term occupants are usually vacationing which means they are gone all day. They are using the property less than long term occupants would, so their electric would be lower. You should just expect long term to be more money, but that doesn't mean they are not being wasteful.
Final though there is don't forget about COVID. Some rentals are sitting vacant. It may be better to have a full unit and pay an extra $100 every month towards electric. They could just leave and you have to consider if the alternative is better. Maybe it is, only you can answer that.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
6y
Yes, do an addendum, or a non renewal notice, lower the rent by what you expected to pay and have them pay their electric. If it is separately metered it would never be a consideration to do otherwise.