How to get tenants to pay for utilities?

11 Replies

How do you get tenants to pay for the utilities? Do they get a bill from the utility companies directly, and if so, how do you set that up? If not, do you personally bill them for the cost each month in addition to rent? How do you get them to pay up, and how do you get them to share the utilities if there are multiple tenants in your property?

Hey @Ben Feder First thing you would need to do is ensure there is a clause in your lease agreement that directly addresses this and places the responsibility of all utilities on the tenant. Our lease agreement specifies not just how the utilities will be managed and who will pay for them, but we also include the date by which we expect our tenants to have transferred the utilities into their names and what will happen if they fail to make the transfer on-time. Once they place all utilities in their name, it's their responsibility.

We deal in student rentals mostly, so we usually have multiple tenants at one unit. We ask them to split these up among themselves and we've not had any issues so far.

Originally posted by @Mary Smith :

Hey @Ben Feder First thing you would need to do is ensure there is a clause in your lease agreement that directly addresses this and places the responsibility of all utilities on the tenant. Our lease agreement specifies not just how the utilities will be managed and who will pay for them, but we also include the date by which we expect our tenants to have transferred the utilities into their names and what will happen if they fail to make the transfer on-time. Once they place all utilities in their name, it's their responsibility.

We deal in student rentals mostly, so we usually have multiple tenants at one unit. We ask them to split these up among themselves and we've not had any issues so far.

 Thanks! Still curious though how that would happen. How would you specifically get the utilities in their name? How would that transfer happen?

The tenant just calls the utility and tells them to switch to their name like any other utility switch. The utility mails the bill to the tenant. Many landlords wisely require proof of transfer before giving keys. 

If the utility is in the landlords name because of multi unit split there are approaches to dividing those costs and putting it back on the tenant. Search for Nathan G’s posts on that topic. 

It's the tenant's responsibility to set up their utilities, if that's what you have written in your lease. Utility companies won't let you set it up for them. However, make sure to call them when a tenant is moving out to transfer the utilities to your name, otherwise the unit won't have any power when you're showing it to the next potential tenant.

@Ben Feder it is easy in a house because the utilities are individually metered and the tenant just pays the bill directly to the utility. It is harder in multifamily if one utility bill covers multiple units. Some people split the bill between tenants, but it is hard to do in a fair manner. In an apartment it is more common for tenants to pay electric only. When I was younger people always cautioned me against renting apartments where heat or water was split with tenants. 

Originally posted by @Forrest Williams :

It's the tenant's responsibility to set up their utilities, if that's what you have written in your lease. Utility companies won't let you set it up for them. However, make sure to call them when a tenant is moving out to transfer the utilities to your name, otherwise the unit won't have any power when you're showing it to the next potential tenant.

 Would it ever make sense to just bill the tenants directly from me or is it always best to have them switch the utilities into their names? Also what if I have a rental property single family home with 3 bedrooms where a different tenant lives in each bedroom?

@Ben Feder   Always put it in there name if you can.   One important thing you need to do is have a shut off date if the utilities are in your name or a requirement of proof they have switched them over.  If you say to a tenant I have a shut off date of x so you have to put the utilities in your name by then it can light a fire for them. Whether you actually enter a shut off is up to you.  Mind you students/ just out on their own tenants are the worst for this.  You can have something called leave on for landlord to avoid shut offs between tenants as well. 

@Ben Feder keep utilities in their name. If you have the electricity in yours and they don't pay you, you're on the hook for the lights. If you stop paying it, they could use that against you in court, creating an uninhabitable apartment. 

If you have a three bedroom situation, it can be a little tricky. If they are all friends, it can be easier to coordinate that and have them split it amongst the three of them, keeping it in their name. If you've done a boarding house situation where you are renting each room individually, I would suggest just paying the utilities yourself. It can create tense situations if someone is using way more water or electricity.

Again, it depends on your lease, but if you don't currently have it in the tenant's name, consider changing your lease next turnover.

Originally posted by @Forrest Williams :

@Ben Feder keep utilities in their name. If you have the electricity in yours and they don't pay you, you're on the hook for the lights. If you stop paying it, they could use that against you in court, creating an uninhabitable apartment. 

If you have a three bedroom situation, it can be a little tricky. If they are all friends, it can be easier to coordinate that and have them split it amongst the three of them, keeping it in their name. If you've done a boarding house situation where you are renting each room individually, I would suggest just paying the utilities yourself. It can create tense situations if someone is using way more water or electricity.

Again, it depends on your lease, but if you don't currently have it in the tenant's name, consider changing your lease next turnover.

 I guess then if I am paying the bills myself, charge a higher rent for the tenants and just tell them utilities are included?

Originally posted by @Ben Feder :
Originally posted by @Forrest Williams:

@Ben Feder keep utilities in their name. If you have the electricity in yours and they don't pay you, you're on the hook for the lights. If you stop paying it, they could use that against you in court, creating an uninhabitable apartment. 

If you have a three bedroom situation, it can be a little tricky. If they are all friends, it can be easier to coordinate that and have them split it amongst the three of them, keeping it in their name. If you've done a boarding house situation where you are renting each room individually, I would suggest just paying the utilities yourself. It can create tense situations if someone is using way more water or electricity.

Again, it depends on your lease, but if you don't currently have it in the tenant's name, consider changing your lease next turnover.

 I guess then if I am paying the bills myself, charge a higher rent for the tenants and just tell them utilities are included?

 You could absolutely do that. It can be a selling point if other similar rentals aren't covering utilities. I used to work for a property management company that charged tenants a $10/mo fee to cover furnace filters. That was an easy $100/yr for them.