Who pays for utilities: the tenant or the landlord?
A big question many new landlords have is whether to include utilities or not. And I suppose there is no right answer, but a solution that works best for you. Just remember human nature tends to use more of a resource when it’s perceived as free (included in rent).
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On the flip side, if your renters are responsible for utilities and don’t pay their bill, it could come back to you! For example, it’s winter time and they let the gas/electric get shut off. Now they’re lighting their house with candles or stretching extension cables to the neighbors. Talk about fire hazard! What if they don’t pay the water bill and your local government puts a lien on your property? For the most part, these things won’t happen if you did a thorough background check before letting them move in.
Take a look at other rentals in your area. Are similar rentals usually including utilities? Try to compare to other private owners rather than large apartment complexes.
In our properties, the tenant is responsible for gas and electric and must have this put into their name on the day they sign the lease or move in. I personally follow up with the utility company to see that it is set to switch from my name into their name. However, we do include water and that is for a couple of reasons:
- 1. We own multi-units and they are not metered separately for water (but are for gas/electric). There’s no easy way to split the bill without a good chance for complaints.
- 2. If the water bill is unpaid, a lien can be put on the property. There is no way I will risk losing my property over a water bill that a tenant failed to pay.
If you do include any utilities, be sure to do the math! Does including any utilities still provide you a positive cash flow? Since we include water, we calculate that into our costs to be sure the numbers work. Also be sure to have wording in your lease that allows for demanding “additional rent” to pay back any utilities that you paid.
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