How do you handle non-conforming spaces?

3 Replies

A building has 2 main units with their own meters for utilities. However, there are also 2 non-conforming spaces.

One liveable attic space with its own furnace but all of its utilities are connected with unit 2. The same issue with the basement unit, its utilities are connected with unit 1.

PS - non-conforming spaces have their own entrances front and back.

When it comes to renting out all units, how would you structure the costs of utilities into rent? Would it be possible to add $200-250 to the base rent for each unit to cover the bills?

Do you think something like this is manageable? A main concern is the tenants will take advantage of this and get careless with the utilities as they are not paying for them.

Thanks for your sharing your thoughts!

They both need to be called a  mother in law apartment.

It is a term that covers so many properties in  Real Estate .

Your broker can wall you through this.

Who ever has control of the the A/C Furnace controls need to pay

the bill and the area where the other tenant is there will need to 

have an understanding that they will be paying for their share of

that bill.

What a can of worms that started!!

Just adjust the rent for the smaller area to cover the free utilities like

30-40 percent more.

Hopefully all four different tenants will get along with this arrangement.

I would be renting to tenants that have a very relaxed mindset for

the heat and air will need to be in a very comfortable arrangement

between each set.

Maybe a blue/red personality for the tenant that pays the utilities and

a yellow personality that pays the extra and doesn't get to upset when

the heat or air is to hot or cold!

It's workable, but touchy!

Good luck

@Bilal Hussain I think the simplest method is to determine an average use for each space. Then I increase it 15% to cover the abuse that is so common when utilities are included.

I also recommend putting a cap on what's included. For example, if the utility bill jumps $400 because a toilet is constantly running, you only cover the amount included in rent and the tenant has to pay the overage. That prevents them from really going crazy with utility costs. If the utilities are in another tenant's name, putting a cap may be difficult.

@Nathan G. @David Avery

Thanks for you input guys!

I was planning on putting both Unit 1 & 2 accounts on my name and I make the payments so tenants wont have to deal with each other and raise issues regarding whos using more. 

Base rents will be increased 15-25% to cover for utilities and I love the idea for a cap. However the issue arises if and when it DOES go over, how will I determine who's using more? Would it be smarter to split the overage costs between the tenants? 

I would obviously notify all my tenants of this arrangement and be transparent with them all the way as the language will be included in the contract. My tenant screening will come into play here and I would need to get the right tenants in who are willing work with me on this.  

Also, how can i determine the average costs of utilities in my area? Do I call the utility companies and ask them for averages? Can I call a Project Management company for these details as well? 

Thanks again!