Shared Utilities - best way to divide costs

[Emy Bernardo]

Hi all - we have an ADU in our single family home and have been including the cost of utilities in the ADU rent. We recently started charging our tenants a $100 flat rate to help cover some of our soaring utility costs here in San Diego. We are moving out of state in a few months and plan to rent out the house and keep our same tenants in the ADU. What is the best way to split the costs of the bills between tenants? The main house is about 1100 SF and the ADU is 500 SF. The main house has 3 bed/1.5 baths, washer/dryer. The ADU has a stackable washer dryer, 1 bath. Both have only one gas wall heating unit. 2 tenants in the ADU and not sure how many we will have in the main house. I am hesitant to charge a flat rate because it doesn't incentivize people to be mindful of energy use. Maybe 1/3 to ADU and 2/3 to main house? Or should we go by # of tenants per unit? Thanks for any suggestions!

[Dan H.]

We own quite a few small multiplexes in San Diego county.  These all have shared water meter.  We have one property with a shared gas and electrical meter.  The state law states that you can not charge more than the actual cost of the utilities.  Any attempt at equitable partition is legal.

I suspect most areas outside of San Diego have no clue as to the water cost in San Diego.  They cannot fathom water bills in the hundreds of dollars (or thousand dollars) per month.

Similar to you, we want to encourage conservation.  In addition, we want to limit our exposure to their utility use.  We charge each unit a percentage.  We base it on the unit and not the occupants.  This is because units transition to new tenants at diffferent times and on occasion occupancy count in a existing leased unit changes.  We do not want to change the lease and charging of the other units based on change of occupancy.

We typically get a single complaint about utility percentage.  We point out that if they were separately metered the cost would be higher because the fixed cost is being shared.  More importantly we point out that they agreed to the percentage when they moved in and that if they do not like the policy they can move out when their lease is up.  We virtually never get a second complaint about the utility charges.

I will add one item.  If there is a utility usage that is due to failure in the unit that is difficult for tenant to recognize (such as a slab leak, toilet flap leaks I expect the tenant to recognize), we pick up the excess charge (we charge the tenant based on previous month).  Our pro forma has a miscellaneous that include these one-off items.  When you have enough units, a utility issue with the property seems to happen virtually every year.  In the last 10 years we have had 7 slab leaks and two water leak at the meter (on our side).  We have had 3 gas leaks  that go unnoticed until either it is finally smelled (which will show up on the bill when it comes) or it shows up on the bill.  We have not yet had this happen on a shared meter (i.e. gas in our name), but if the tenant indicates their gas bill is far more than normal we pay the overage.  It is not the tenant's fault that the property had an issue that resulted in higher utility usage so it is fair we pay for the utilities resulting from a issue with the property.

Good luck