Just got our first water bill... so let's talk about Sub-Metering

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Just got our first water bill... so let's talk about Sub-Metering

Lucas Bennett
Rental Property Investor · Portland, OR · Member since 2013 · 25 posts · 4 votes

Dear BP Family, 

I know this isn't the most flashy of topics, but here is the situation I am in: 

My company recently purchased a 7-unit property in Portland, OR (Keyword alert: 'Portland' is being discussed on biggerpockets  :)  ), and due to the fact that the building is older, the water utility is master-metered. Anyone familiar with Portland knows that the water/sewer system is a mess, and we just received our first water/sewer bill, which was quite large, to say the least. 

I recently found out about sub-metering, and I would like to ask the investors/landlords on the site a couple questions.

1. I understand that we will still receive/pay the master-metered water bill from the city, and that the sub-metering company will bill the units directly and mail us the money (sans their cut), BUT how do you enforce the new water utility bill with the individual tenants. If one unit doesn't pay the bill we can't shut the water off JUST to their unit, obviously. Should we write a new lease contract, including the sub-metered water utility, so if they don't pay it then we can start the eviction process, like it works with rent? Have you all had good success with this process? Are there better options?

2. Anyone have any good suggestions for Sub-metering companies? I spoke at length with a company called Guardian Water & Power, and they seemed very legitimate with what I would consider decent prices, but I'd love to hear who you all are using. 

Also, if anyone on the site has other alternatives to sub-metering I would love to hear them!  

Thank you all in advance

Lucas

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  • Mike D.
    Middletown, NJ · Member since 2011 · 108 posts · 22 votes
    12y

    I don't think you can ever shut the water off on a tenant. Your recourse would be to have some wording in the lease that states all fines and fees(water bill) will be considered rent and all funds received will be applied to them before the monthly rent. 

    0Reply
  • Account Closed
    Involved In Real Estate · Carlsbad, CA · Member since 2014 · 10 posts · 6 votes
    12y

    Hey Lucas,

    I had a somewhat similar situation but on a smaller scale. I have duplex on a single meter for water, gas, and electric. I wrote into the lease that the bills had to be split between each unit 50/50 (I would invoice them at the end of each month with 50% of the utility cost). In retrospect I should not have bee surprised when after three months I received complaints from both tenants (within a day of each other) that the bills was too high and that the other unit is using way more water/electric/gas and the split is not fair. I did a boat load of research on sub metering companies and also installing a sub meter myself. After speaking with a bunch of sub metering companies in the area they all quoted me a fairly high price for each month to meter. I was lucky after opening up a wall in one of the units to find out that the plumbing system for each unit is separate. I found a local plumbing supply store in San Diego that sold refurbished gas and water meters (electric meter off the internet) and contacted a plumber to install them on one of the units. All in the installation of the meters cost me around 700 dollars with labor. The sub meters are installed on an exterior wall of the first unit and on the way home from work every month I read the meters and with a simple spreadsheet I come up with the usage per unit.

    I'm not sure of the specifics of your seven units plumbing, but if installing sub meters yourself is an option it was fairly easy to do and has completely silenced my tenants. I have a family friend with a similar sub meter situation on a triplex and he pays a neighbor boy five bucks a month to ride by the property and text him pictures of each meter.

    I do lay out the sub metering situation, monthly invoicing, monthly meter reading (my visit on the 15th of every month), and requirement to pay the invoice with the rent monthly in my leases. @Mike D. is correct though, at least in my area, in that you cannot shut off basic services to a unit if they do not pay (essential services). That is a pitfall of the landlord holding utilities in their name. However, if they do not pay they are in violation of a condition of their lease so they can be noticed/evicted through the typical means. Just understand that you will be paying for their utility usage during the eviction process. 

    Crazy long response but hope it helps! Let me know if you have any specific questions.

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  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    12y

    @Lucas Bennett here are some thoughts.

    1) you can't just start billing the tenants for water and sewer. That is a change in the terms of your lease or MTM agreement. If they have leases you would have to add that in when the current leases expire and you get new leases. With the MTM you would need to give proper notice of the change.

    2) There are numerous technical solutions to the metering issue. With 7 units, hiring a company would not likely be cost effective as the basis is not there. I know one of the pod casts mentioned making these changes to a property. I think the guy was in AZ. I'll let you search for them. I'm sure it was listed in the show notes. Doing it yourself is a huge pain. I know first hand about this. With water, I charge a flat fee that covers costs most months. Water use tends to be very steady unless you have outside watering or repair issues. Those leaky toilets can get expensive.

    3) Collections, you should check locally as sometimes the Public Utilities Commission (PUC) gets involved and I think there are some states that have requirements on how sub-metering has to be done.  What works in my state, is I back bill the tenants. I have a clause in my lease that says all money received is used to first pay outstanding items like fees and utilities and then money is allocated to rent. If they don't pay utilities then I post notice for late rent and move to eviction if necessary. I've never had to do that.

    Hope that helps.

    0Reply
  • Lucas Bennett
    OP
    Rental Property Investor · Portland, OR · Member since 2013 · 25 posts · 4 votes
    12y

    @Bill S. @Account Closed

    Thank you all for your responses. 

    Kyle, thank you for taking the time for that long response. I will look into installing the meters myself and see which option makes sense.

    I wasn't ever planning to shut the water off on my tenants, I was just referring to the fact that if they didn't pay a utility that was individually metered to them, that utility would be shut off by the city. That's an 'incentive' I couldn't hold over their head.

    I like the idea of adding the terms into the lease. The tenants are currently on MTM leases, and we have been meaning to update them. They will of course get the proper notice.

    I'll be sure to check with the city before I move forward with anything. Thanks again. 

    0Reply
  • Zach Schwarzmiller
    Investor · Snohomish, WA · Member since 2013 · 629 posts · 84 votes
    8y

    @Lucas Bennett did you ever go with Guardian? I have debated using them too. I debated it a few years back but just ended up putting in individual meters, and have done this several times now. I am looking to mix it up on a 5 unit I am buying as I don't want to spend $50,000 on meters this time. Thinking to go with a service like Guardian. 

    0Reply
  • Lucas Bennett
    OP
    Rental Property Investor · Portland, OR · Member since 2013 · 25 posts · 4 votes
    8y

    @Zach Schwarzmiller Yes we have been using Guardian Water & Power for the last 3 years or so. Only problem we've ever had with them is when the City came in and changed the cover to our water meter on the street; Guardian couldn't open it to check the numbers. That has since been rectified. 

    We get an email every month to release the bills to the tenants, so we can check the bills before they send them out for us. I did hear from another BiggerPockets member who saw this thread and called me that Guardian now requires you to have a certain number of units before they will release the bills for you. So you may have to print and send the bills yourself with if you only water 5 of your units metered by them. Apparently we set up our account with them early enough that we are grandfathered in. However, I've never checked with Guardian about this. I'm sure they are reading this so maybe they can chime in. 

    There is an online portal to pay as well, so if your tenants are computer savvy enough they can pay online. I think the rules around how you can bill your tenants for utilities is different in every state, but I'm sure they'd walk you through your options with them. 

    Conversely, you should check if there are ways to bill your tenants that is easier than sub metering. I believe some cities/counties/states allow you to divide your master utility a certain way among your units. Don't quote me on that, but I would definitely look into that before you pull the trigger on sub-metering.

    If you do sub-meter, I think Guardian could definitely work for you. 

    1Reply
  • Zach Schwarzmiller
    Investor · Snohomish, WA · Member since 2013 · 629 posts · 84 votes
    8y

    I don't want to implement a RUBS program for such a small building, I think I am going to give Guardian  try, I sent them an email to get the conversation started, thank you @Lucas Bennett

    0Reply
  • Lucas Bennett
    OP
    Rental Property Investor · Portland, OR · Member since 2013 · 25 posts · 4 votes
    8y

    *Hey Siri, what is the RUBS program*

    Yep, that's what I was referring to! I probably should have googled it before I replied. 

    It's almost too easy to learn something new on this site. Good luck with everything, @Zach Schwarzmiller

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