Billing city utilities (garbage sewer/water) back to tenants?

Question

I own a duplex in Minneapolis, MN and would like to charge the city utilities back to the tenants. Water/sewer isn't metered separately for each unit and the garbage fee is lumped in on the same invoice. Anyone have a good solution or example of what they might be doing to offload this cost and help their tenants realize they should turn the faucet off occasionally? Thank you in advance!

John Woodrich · Answer

I am with @Tim Swierczek here - tenants are not going to pay the same amount of rent for unit that they also have to pay additional utilities.  If a unit rents for $900 + electric, they will notice when yours rents for $900 + electric, water, sewer, and trash.  Hopefully when you purchased the property you factored in the cost of the utilities you pay.  I do not want to nickle and dime tenants to up my cash on cash return by 1.112133551678%.

That being said, I am starting a renovation project converting a SF to a duplex.  Full gut job so I am contemplating metering the water in each unit so I can pass water and sewer.  This is relatively easy as we are re-plumbing the whole house but I won't be able to get market rent and charge extra utilities.  I also don't want to have to check the meters monthly, quarterly, etc.  Right now I am planning to plumb the property so I can add a meter to each unit down the road if I chose to.  May also consider a mechanical meter in case I am ever concerned who is using all the water.

If you are looking for resources on how to charge it back look at the MN AG Landlord/tenant handbook.

Jordan Moorhead · Answer

@Brandon Capelle there actually is a solution called TrueSubmeter

Tim Swierczek · Answer

@Brandon Capelle My thought has always been to include those utilities in the rent as its typical for the area and good tenants would not allow you to charge full market rents plus water and trash. Or in other words, you would need to lower gross rent accordingly in most situations. That being said I get it I have 8 properties in Minneapolis and the costs are definitely higher. I like the idea of capping the amount you will pay. I have a cause that does that caps what I will pay at $25 more than the 12-month average. I would only look to enforce it for unreported leaks or other abuse. I wouldn't look to charge $10 if it was $25 more than the 12-month average, because it's not worth the accounting time.

The bottom line is MN does have laws on what you can do and how you must inform the tenants of utility history costs if you plan on billing back. You will want to make sure you arm yourself with the data and prove you gave it to them otherwise a tenant advocate attorney will eat you for lunch.

Here's the law https://www.revisor.mn.gov/statutes/cite/504B.215

The bottom line is MN does have laws on what you can do and how you must inform the tenants of utility history costs if you plan on billing back.  You will want to make sure you arm yourself with the data and prove you gave it to them otherwise a tenant advocate attorney will eat you for lunch.

Here's the law https://www.revisor.mn.gov/statutes/cite/504B.215

Jordan Moorhead · Answer

@Bowman Klinkenberg I have not yet but am looking into it for my rentals. They don't only charge $7 a month per unit and the set up fee isn't too bad from what I remember

John Woodrich · Answer

It shows the pricing model on their website.

Bowman Klinkenberg · Answer

@Jordan Moorhead that's an interesting solution. I'm curious what the pricing model is like for smaller rentals since they need to deploy a cell router at the property. Have you tried using it?

Chris R. · Answer

We have the same situation...we took last year's utility bills, split them among the three units, and added them to market rate rents.  We figure we'll at least get close and we added a clause in the lease stating rent increases will happen annually with increased utility bills.

Vee K. · Answer

@Brandon Capelle , I have the same situation. I was lucky to have one empty unit and one lease renewal around the same time. So, I told the tenants that I would cover water up to $x then I will send them an invoice each for 50% of the rest.

i.e. Water bill is $200 and you agree to pay $50. You can invoice them for $75 each month.

Billing city utilities (garbage sewer/water) back to tenants?

Most Popular Reply