Paying your tenants water arrears... Fair?

11 Replies

So I received my weekly mail this morning through that convenient slot in my door and curiosity made me go pick up that envelope and in that formal letterhead I saw the utilities' company's name in bold letters.  Sure, we all pay our utility bills but this particular envelope  was coming from a property I currently rent out in a city 4 hours away.

The letter quickly explained that my previous tenant had arrears on their account and with the legislation in place in our beloved province the landlord is held responsible for any of their tenants arrears once the utility makes a reasonable attempt to recover the late payments.   

So here I am, stuck paying for someone else's lack of responsibility.  Fair? I think there has to be a better way.  

Jamie

Real Estate Investor

Ontario, Canada

@Jamie Montpellier  

There were folks here who thought we should adopt similar regulation.   I'm not responsible for my tenants other bills, not sure why I would pay for his/her utility consumption.

Can you direct Ontario Hydro (Power-one or whatever their name is now) that you will not longer be accepting such redirected billing and, in the future, they should suspend service and notify you if a tenant falls into arrears.

... or, you could always send them a bill the next time a tenant falls into arrears with rent. ;-)

@Jamie Montpellier  

Here in the states we call them "lienable" bills, or something like that in most places.  You are allowed to put them on your tenant, but the property owner is responsible for actually getting them paid.  It sounds like something similar is going on in the municipality housing your rental.

Fair?  Depends on your point of view.  This information is probably available from your municipalities.  Do they go out of their way to remind landlords about their responsibilities?  Not in my experience.

My experience with these goes something like this:

1. Pleasant letter to the former explaining that the utility company was late billing them, so they missed a payment.  I also put in that I need them to pay the bill to me as I covered it for them.  (This letter is generally ignored)

2. Reminder Letter with the same above.  Usually a couple of phone calls as well. (still no response)

3. A letter with a formal threat if they don't pay.  Pleasant, but no more kid gloves. (these are usually "lost in the mail")

4. A court order to appear in small claims court for the bill, plus later fees, plus court fees.  (this almost always gets a response and it tends to be nasty)

Been in the same boat as you a few times!  And the municipality had adopted that regulation without notifying me (or in my ignorance, chose to ignore it, can't remember). Not much you can do but bite the bullet and pay it.  Trying to track down an ex tenant to recoup unpaid bills is like pulling teeth.  

I like Roy's suggestion, (if it's water, it'll be the local utility that you're dealing with), and ask them to notify of unpaid bills.  However, I think I tried that once, but seem to recall that there's a new privacy issue that doesn't allow them to do this?? 

To avoid this, I now pay all utilities and charge back to tenant, or include it in the rent.  

Most companies are changing their stance on this because of local landlords and push for the local governments.
Utilities are charging tenants and the charges follow them to the next property.

I would call the water company and provide them with tenants new contact info if you have it.

I see you are also in Newmarket. I run a monthly networking event here in town. It's a great way to connect with like minded investors and to learn from each other.
Feel free to reach out.
Gary

There are a few strategies that some use to proactively deal with such a utility situation.  Once in arrears, you have to rely on what the terms of your lease state.  And of course it's tough to get paid when the tenant has little to no money to pay with.

One way is for the landlord to keep bill in landlord's name and to bill tenant for utility usage.  One landlord I know even has the tenants read the meter every month and just send a payment with the rent that includes the utility amount corresponding to the usage; since he sees the bill he can determine whether the tenant has been accurate in their readings or not.

Another way is to require the tenants to give you a copy of the bill each month.  When the balance isn't zeroed out, you know they fell behind.

Of course your lease must be set up to reflect whatever approach you take.  And the lease should spell out what happens if the utility goes unpaid.

My mom owned and managed a rental in Annapolis. The water was liens le but the security deposit was no due back for 45 days. This was done to allow landlords to check and see if the utilizes  have been paid before the deposit is returned.

Water is lienable in NJ. If a landlord puts the utilities in their own name, they can bill the tenants for it as "additional rent". Not paying "additional rent" is just like not paying the rent itself - and an eviction can follow. However, the water/sewer in the city where our properties are only bills quarterly, so the tenant can rack up quite a bill by the time they're evicted. And if the water/sewer is in the landlord's name, you cannot have it shut off.

However - water/sewer in the tenant's name can, and will be, shut off for non payment, and you'll be surprised how fast a tenant can come up with the money to keep the water on. But in the end, the water/sewer is on me if the tenant doesn't pay when they leave and their deposit doesn't cover that, plus any damages.

We won't give back the deposit for at least the full 30 days, or until a final reading and bill is provided to us by the water company.

Thats the hassle that these villages really ding us with. Here in Illinois, the only utility that we can get stuck with is the water and/or sewer garbage bill. But only if those are billed by the village. Once a utility company takes over, then we no longer have that responsibility.

Some of the houses we are REQUIRED to pay the bill. We don't even have the choice to have the tenant pay.  Those are the headaches.

I'd much rather have the tenant pay the village and leave me stuck with the bill if they don't pay. Its a lot less headache to deal with. And we've only been burned a couple times. Once you get burned, you tend to check the village for the bill and that tends to limit it too.

Then you just withhold the security deposit. Now if you get a tenant that stiffs you on the last month's rent and has no security deposit left - or that gets evicted, then you're coming out of pocket for that bill.  But I still think its worth it not to bill.

If it makes you feel better, I'll share my recent story for a nightmare bill I was stuck with.

Went through my first eviction in Cook county. Took 5 months. Took another 6 weeks to get the house rehabbed and rented again.   Tenant went to put the water in their name and the village said there was an outstanding balance that needed to be paid.  Total amount $550!

I'm like what?????  You let the tenant run up a $550 bill and didn't shut it off? And now you think you're sticking me with that?  I was fuming and the village rep wanted no part of it. They then looked up and said they had actually tried to shut it off in december but their shutoff didn't work.  So they agreed to roll back the charges to $140......

Done. 

So don't be afraid to negotiate and rage a little on the employees if those numbers get crazy. At some point, the village is still responsible for limiting how much exposure we the landlord has to these bills.

Just because its a rental and they know we'll eventually have to pay it, doesn't mean its ok to let them run it up for months and months unpaid.  Frame it that way and you may be able to get them reduce it.....  If not, you'll get to direct some frustration at them so you can vent a little and at least get your money's worth. :-)

Yep, WSG is leinable in my city too.

Ways we reduce our exposure:

- Put in rental agreement that being behind on utilities is the same as being behind on rent, with the same consequences.  And not allowing occupancy with disconnected utilities.

- In the application, offer to include WSG in rent.  We charge a flat rate and true it up each year.  If they decline, they need to pay a higher security deposit.

- Check in with the utility company to make sure accounts are paid up, since they will let them go three months unpaid before disconnecting  that adds up to more than my security deposits.

- Never ever return any security deposits until the utilities are paid up.  Apply any amount to return against their account if your laws don't prevent that.

It's not fair, it's a royal pain.  But so are many other things in life.

@Jamie Montpellier  

My apologies for the earlier response ... I must have missed the reference to the water utility in the title (age related issue?).   When I read your post, I drew the conclusion it was the hydro company which had passed the arrears along to you.

Our water bills are always sent to the owner of the building {though we bill through to the tenants for SFHs}, so this particular situation w/r to water arrears does not occur.

In our city, the water/sewer bill and the garbage/recycle bill are the property owners responsibility if the tenant doesn't pay.  

Water/sewer is a city owned utility and they will bill the tenant and also send a copy of the bill to the owner.  We can see the water usage and bill paying tendencies of the tenant.  For utilities that can result in a lien, find out if you can get a copy of the bill too, or check it out online.

We had a tenant in one of our houses who did not pay his water bill since the day he moved in.  As per the rental agreement, he called the utility and set the account up in his name, but didn't pay one bill.  We were unaware.  In the third month we had to do some maintenance at the property that required us to use a little bit of water to hose something off the fence.  The tenant ranted and raved about how we had no right to use water that he was paying for.  He paid rent late the third month and nothing the fourth month and then skipped.  Later we found out he had stiffed us with the water bill from day one.  His ranting and raving was just an act.  After that, we now keep tabs on how up to date tenants are in paying their utilities.

Keeping tabs on the water usage by looking at the bill will also help you identify leaks or unauthorized occupants, as the water usuage will spike for either of those reasons.

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