Caps on Utility Bills for MTR Guests?

Question

Hi, Fellow BPers:

Need some advice here. Last month, the electricity bill for my 1200 sq ft townhouse (mid-term rental) built in 2002 hit almost $400! When I was replacing the Wi-Fi the other day and discovered a running water pipe behind a wall. Upstairs, the toilet was continuously running – who knows for how long. It's frustrating when tenants don't even bother reporting such issues, especially when they're not paying for utilities. I was pretty taken aback and it got me thinking about possible solutions. What's your take on setting a utility cap in the rental agreement for mid-term rentals? I'm not planning to charge for anything over the cap, but maybe it could be a gentle nudge for tenants to be more mindful about their utility usage. Just some background info: I have about 5 or 6 MTRs now and only a small portion of guests are like that. So, it might not be fair to just raise the rents for everyone.

Thanks for your input!

Lee

Joey Banasihan · Answer

Hey @Leon Lee,  I think having that language in your lease is always a good idea. I cover the idea of utilities and mindfulness around maintenance in my Digital Property Handbook where I talk about those things, and cover a lot more details around the property. We can always front load and provide the information the best we can, but I have yet to find a way we can have tenants feel the same sense of ownership that we do for our properties. Which is a bummer for sure.  I hope you find a good solution!

Bonnie Low · Answer

There are leak detection/automatic water shutoff valves you can install that are pretty inexpensive (as opposed to repairing the damage from leaks or paying a super high water bill). It would at least give you the ability to notify the guest that a leak has been detected so you can either get them to shut it off or put in a repair request or allow someone in to troubleshoot. A lot of people cap the utility expenses then backbill the guest for any amount over the cap. In the midterm space most guests do not want to put utilities in their name for relatively short stays, particularly if the utility requires a credit check or substantial deposit so if you don't offer paid utilities it will cut down on your pool of potential renters. Also check your landlord/tenant laws to see whether the guest having utilities in their name confers tenant rights. I know it does in some states and you want to avoid that.

Clayton Silva · Answer

Definitely not a bad idea at all.  I would check the local landlord/tenant laws to ensure the feasibility of that, but I totally get your frustration.  Had a similar experience with an Airbnb in AZ where our solar went out and we didn't notice until we got a $600 electric bill for AC usage!

Andrew Bosco · Answer

I just include language in the lease about utility usage and cap. I look at what the average is for an LTR and make sure it is known. I also have a no windows open clause while heat runs.

Caps on Utility Bills for MTR Guests?

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