Tenant responsible unpaid utilities

Minneapolis, Minnesota
Managing Your Property
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Tenant responsible unpaid utilities

Jeffrey HennenPro Member
Member since 2021 · 9 posts · 1 vote

Hello, I am trying to understand the legalities of what a Utility company can do in the event a tenant does not pay their utilities, mainly electric and Gas. I ran into a situation specifically for my water bill that they were in charge of, however, they did not pay for their water bill for nearly a year and a half and I didn't notice and then almost got assessed onto my taxes for the following year. Ultimately they paid for it but was too close. 

For the case of Gas/Electric, what can these utility companies legally do. Here is an example of the laws associated with utility companies (That I know of).
https://www.revisor.mn.gov/statutes/2021/cite/325E.025

https://www.revisor.mn.gov/statutes/2021/cite/327C.01

https://www.revisor.mn.gov/statutes/2021/cite/327B.01


From my interpretation "A utility may recover or attempt to recover payment for a tenant's outstanding bill or charge from a property owner where the manager, acting as the owner's agent, contracted for the utility service." I as the owner would be ultimately responsible for the utility bill?

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James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
2y

@Jeffrey Hennen in general, in MN, a tenant creates there own account with utility provider, no different than if they made a cell phone account. And for that, all billing is A-B with tenant and utility, including collections if such were a case. 

Water and sewer is the major exception to this, probably because it's the only government utility, and ran with such "fantastic" efficiency we have come to expect from government ran entities. 

If your doing things correctly, with a correct lease, you have multiple details and clauses in your lease speaking to various agreement's and remedies as it speaks to utilities. So, you should lean more so on that and not getting lost in statute detail's with utility providers. 

On water/sewer, that's a continuing down slide. It's very possible in a near future it will be best to just install a privately owned meter, have an agreement in lease for a billing rate per unit, and direct bill it monthly. In theory one could use the statement, but problem is the significant lag time in those, zero ability to look up to get a reading on request, ever. And with the private unit's one can get now, it just solves all that, readings on demand. 

And lastly, make sure to rent appropriately. If your leasing to people that have no fear of collections, judgement or garnishment, well ya better be johnny-on-the-spot with enforcement actions to mitigate loss exposure, and know you will be paying some water bills.     Or, like me, lease to people who are risk/loss averse, with credit to protect, incomes garnishable etc.. 

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  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    2y

    @Jeffrey Hennen in general, in MN, a tenant creates there own account with utility provider, no different than if they made a cell phone account. And for that, all billing is A-B with tenant and utility, including collections if such were a case. 

    Water and sewer is the major exception to this, probably because it's the only government utility, and ran with such "fantastic" efficiency we have come to expect from government ran entities. 

    If your doing things correctly, with a correct lease, you have multiple details and clauses in your lease speaking to various agreement's and remedies as it speaks to utilities. So, you should lean more so on that and not getting lost in statute detail's with utility providers. 

    On water/sewer, that's a continuing down slide. It's very possible in a near future it will be best to just install a privately owned meter, have an agreement in lease for a billing rate per unit, and direct bill it monthly. In theory one could use the statement, but problem is the significant lag time in those, zero ability to look up to get a reading on request, ever. And with the private unit's one can get now, it just solves all that, readings on demand. 

    And lastly, make sure to rent appropriately. If your leasing to people that have no fear of collections, judgement or garnishment, well ya better be johnny-on-the-spot with enforcement actions to mitigate loss exposure, and know you will be paying some water bills.     Or, like me, lease to people who are risk/loss averse, with credit to protect, incomes garnishable etc.. 

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  • Jeffrey HennenPro Member
    OP
    Member since 2021 · 9 posts · 1 vote
    2y

    Yeah that makes sense. Yeah I bought my first duplex in mound as a house hack on a distressed property and had tenant holdovers from the original owners. What seems to me is still a good deal just expensive with a major learning curve for sure.

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    2y

    Talk to your utility providers. Water is usually tied to the house, so the owner is ultimately responsible. I have my tenants pay for those, but through me. So I get the bill (and pay) and then the tenant pays me that amount. Where I have rentals, the others are tied to the person on the bill, so if the tenant has those in their name and fails to pay, then the next time they try to get connected, they will have problems.

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  • Kevin Sobilo
    Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    2y

    @Jeffrey Hennen, in my area (Pennsylvania) it really comes down to WHO is the provider a private company or a government entity. With a private company provider they can only go after the account holder. With a government entity they can lien the service property if the bill goes unpaid no matter who the account holder was.

    In my area the most common utilities provided by municipalities are garbage and sewer, but there are some oddball places where the municipality provides electricity as well. I know of places not near me where the municipality provides water as well. So, almost any utility in theory could be provided by the government and fall into this category. 

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  • Benjamin Sulka
    Cleveland, OH · Member since 2022 · 826 posts · 578 votes
    2y

    Jeffrey, 

    Here is an answer as a tenant myself (I'm 22 looking to buy my first house hack deal in 2024 but renting for now). 

    This will parrot much of what was already stated, but my landlord includes our water bill in the monthly rent. We live in a good area with solid tenants, so he doesn't seem to have any qualms about charging a flat rate for water. 

    In terms of the gas and electric, these utilities are in my name as a tenant and I'm responsible for these. If I didn't pay, this wouldn't have any impact on the landlord whatsoever. Just like I'm responsible for my car payment, I'm responsible for my utilities. 

    Hope this helps from a tenant perspective! 

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  • Jeffrey HennenPro Member
    OP
    Member since 2021 · 9 posts · 1 vote
    2y

    Thank you everyone for your insights. Very new to real-estate investing and managing of a property, so I am in a fight to learn every day try and keep ahead of things and have had some close calls already over the last two years of owning my first rental.

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