Pay the Water Bill or Not?

Question

In the town I invest in, the Water Department will send a bill to the tenant, but the understanding is if they don't pay, the owner is responsible.  I've noticed most other landlords in my market pay the water bill, regardless of whether the property is SFR or not.  The other landlords are my competition for tenants, to a small degree.  Would you cut the rent a little to not pay the bill, leave the rent (average market rent) as is and tell them to pay it, or just pay the water bill yourself?

Marcia Maynard · Answer

Keep the rent at market rent, have the tenant pay for the water, but add value in another way.  See what happens.  If you offer a nice unit at a fair price it should rent fine.  If there is significant market pressure for you to pay for water, then do so.

Water is a variable utility, so we put the responsibility on the tenant to pay for it, unless it is in a multiplex that is not separately metered.  We deal with both situations, so we do it both ways.

How to save water:  Install water saving devices throughout your properties... shower heads, sink aerators, low-flow toilets, etc.  Even if your competition includes water and you do not, your lower rent will be attractive and you can set yourself to shine over your competition in other ways.  Don't allow car washing on the property.  Install landscaping that requires less water.

Gadgets that help prevent water damage if water goes where it shouldn't be going: water alarms (place under kitchen sink, next to hot water heater, next to washing machine) and a "dwip" pan for under the dishwasher (if the dishwasher starts to leak, it forces the water away from the back of the cabinet and out onto the kitchen floor where it can be seen.)

This is how we do it:

Utilities that are variable (cost tied to use) - electricity, natural gas, and water/sewer - tenant pays

Utilities that are fixed (flat fee) - garbage/recycling, yard debris - landlord pays (but we factor the cost into the rent.)

In our city, both water/sewer and garbage/recycling will become a lien on the property if it is not paid.  We just make clear with our rental agreement what is the tenant's responsibility and what is ours.  Then we enforce the rental agreement.

If the tenant falls short in meeting their obligation, we serve a 10-day notice to comply.  We also do regular inspections, but if a tenant breaks a rule (such as not paying their utilities), they get an extra inspection each time.  If they are repeat offenders, they get a rent raise too.  If they really become a problem, we serve a 20-day notice to vacate and start them packing.  If they won't leave on their own, they get served with an eviction and unlawful detainer.  That's taking it all the way, past your current question, so I will stop there.  Good luck!

Colleen F. · Answer

We have a similar situation and have it in our name as they won't officially put it in the tenants name. What is the cost of water in your area? Ours runs about $60 a quarter. We pay but have an excessive use clause that says we can charge back excessive use. I only had one set of tenants where the bills were significantly higher and we thought about the excessive use charge. Heat and other utilities they pay. Now trash there is no municipal pickup and I wish we could have them pay that  because that is $ 165 a quarter and climbing but it must be included. Even though trash isn't something that goes up with use (at least not in that area) I think that things you pay for end up being appreciated more.

In general I find tenants think more about what they pay then what is " included" in the rent. We include the water in ours due to the unreliable nature of the student population and the relatively low cost but if you think you can have the tenant pay it without a hassle I would do it. The tenants only seem to notice the bills included in the rent once- on the day they sign the rental agreement, after that it is completely off their radar.

Martin Scherer · Answer

The city where my rentals are will not put the water in the tenants name.  So you are left including water in the rent and hope you are charging enough or as I do back charge the tenant.

I started doing this years ago when I found that a lot of profit was going to long hot showers in winter and green grass in summer.

I sent a letter to my tenants telling them instead of raising the rent when the lease was up they would be charged my actual cost ow water the next month.  The tenants liked this idea rather than a rent increase.  If I had raised the rent I could have perhaps gotten $25 more to remain competitive in that market. So actually I am paying $50 less for water.  Thy are happy with no rent increase and I am happy with more money in my pocket.

As I said I started this years ago and as water has gotten more expensive for the tenants the usage has gone down and the billing to them fairly level as they watch their usage when they pay for it.

Curtis Bidwell · Answer

Like many others, water is a municipal utility and can be leaned against the property.  We have the tenants pay it when separately metered and request a 'courtesy copy' of the billing from the utility so we know if they are getting behind.

When people ask "Is water, sewer, garbage included?" My standard response is that, 'no, you control your own costs and you don't have to subsidize your neighbors habits.' That generally elicits a favorable response.

Alice K. · Answer

2 years later, and here I am reading these comments.Thanks everyone. I think in my area it is usual for owner to pay, however in order to simply break-even in a unit I need to have that water paid somehow, preferably not in the base rent or the rent price is too high for the area.

I'll be looking into @Curtis Bidwell's idea-- the duplicate copy is great advice as liens are my very worry. I finally found a rental lease that's acceptable (took forever as so many have open-ended / missing clauses), hopefully there is mention of that in there (I don't want to add another awkward addendum but if I have to spell out terms, better now than later).

Dawn Anastasi · Answer

One way to handle this for example if you generally have a $150 per quarter water/sewer/trash bill - have the tenant pay the actual amount but include an amount every month for them to pay versus one bigger bill every quarter.

Example: rent is $850 but instead of remitting $850, they remit $900 and every 3 months get a credit of $150 on the water bill.  So if the water bill is $160, then at the end of the 3 months they'd only owe $10 more.

Michele Fischer · Answer

Water/sewer/garbage can be leined in my area as well.  We learned that the hard way when a tenant left with a $600 bill.

We market the unit at the market rent without WSG included, with an option that they can add it to rent or they can put it int heir own name and add $300 to the security deposit.  Ont he application we have them indicate their choice.  Most choose to include it in rent.  But low income tenants could get cost breaks by having it in their name.

If it stays in our name, we monitor the amount and if their usage is high we tell them we will need to raise rent if it continues, which it doesn't.  We track the annual amount we charge vs the cost; if it is under they get it back at the end of the year, but it usually is just slightly over and we are willing to pay it.  If they put it in their name, we get copies of late bills from the utility and monitor it very closely, using a 3 day notice if needed.

Chris K. · Answer

I personally would NEVER have the water bill be my responsibility (unless required by law obviously). My lease would always outline that the tenant is responsible for paying the water bill and I would just lower my rent the average monthly waterbill cost if I had to. If you make so they aren't responsible then the tenant will may on the mindset that the water is "Free" and showers will be longer, the clothers washer will get ran for that one dirty pair of jeans, and their cars will stay clean.

If you must include it then I'd put in a clause that states any amount over (Whatever your average bill is) will be the tenants responsibility. Same with any other utilities.

Edwin Cruz · Answer

My properties are in Chicago and any unpaid water bills becomes like an unrecorded lien (in Chicago you can NOT sell any property with any outstanding water bill). So I handle my water bills the same way I handle my taxes and insurance (I pay them myself). I just will not trust my tenant with an item that will impact my title. I need to add in that this is customary in my arena.

Pay the Water Bill or Not?

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