How to switch utility bills over to tenants?

[Henry Le]

Hello BP community,

I have a newbie question.  Let's say you own a rental property.  How do you go about arranging the electric, gas, water, and other utility bills to be paid by the tenants?  Do you deactivate the services and have the tenant switch them on to their name when they move in?  

Thanks and cheers!

[James Wise]

have the tenants call to switch them into their name. You can call the utility companies later to confirm the order was placed

In Cleveland were I invest the property owner is the only name that the water can be in.

[Henry Le]

Originally posted by @James Wise:

have the tenants call to switch them into their name. You can call the utility companies later to confirm the order was placed

In Cleveland were I invest the property owner is the only name that the water can be in.

Hi James, thanks for the info.  Just to double check, the utility services will be under my name until the tenant calls to switch it into their name, correct?

Here in Sacramento, I believe sewer and garbage will be in the owner's name.  I'm not sure about water.  We're in a dough here so water prices are increasing.  Would be nice to be able to switch water into the tenant's name.  Thanks again!

[James Wise]

yes. It stays in your name until it's switched into theirs.

[David Hutson]

Evening all.  Sacramento is different than other cities back east.  You won't be able to change the utilities in Sacramento to the tenants name.  You can have their names on the bill but you will still be responsible for it.  Water is the same as it's on the same bill.

Some cities like Elk Grove will allow you to place the water bill into the tenants name.  If you find yourself in a situation like that then you need to have them send you a free copy of the bill each month.  If the tenant moves out and does not pay the water bill the water company will put a lien on the home, which will go against you, not the tenant, in the end.   I would recommend you keep Sac Utilities in your name and go to your address unless you really trust the tenant.  I don't trust my tenants that much.

[George P.]

instead of calling the companies to confirm,  you require a printed confirmation number from the future tenant before move in 

[Henry Le]

@David Hutson undefined

Thanks for the info.  In that case, would the owner pay for the utility and incorporate the price into the rent?  Or would you forward the tenant the bill every month to have them pay it?  Thanks again.

[Shelly Swanzy]

If I had to keep the utilities in my name then I would up to rent to include the cost of utilities up to X amount of dollars and also incorporate a utility deposit into the lease, and the utility deposit is used to cover any overages on utilities and outstanding utilities bills and anything left would be returned to them after they moved.

I don't like keeping the utilities in my name because when the utilities aren't in thier names they tend not to care how much they use and the bills can get crazy and eat into the rental income.

[Henry Le]

@Shelly Swanzy 

Thanks for the info.  You do have a good point, if the tenants aren't paying for it then chances are they don't care how much they consume.  Imagine having the AC and Heater running all day.  The bill would be crazy high.

[Shelly Swanzy]

@Henry Le

That they do Henry. My neighbor/landlord just had to evict a tenant for nonpayment and the utilities were included in the rental agreement. The tenants finally left last saturday (the day ordered by the judge to be out) they hadn't paid anything since June and then they'd only paid half of the rent. So they got free rent & utilities for the whole summer and if that wasnt bad enough after landlord entered home when they were moved out they had left the sliding glass door completely open, taken out all the storm windows and had the central AC cranked way down. Guess they felt like she'd wronged them, go figure.

[David Hutson]

@Henry Le 

I would ensure they had the gas and electric in their name, water if it's not in Sac city.  Those are the expenses they can run up.  Sewer and garbage are the same every month unless there is a small permanent increase.  Those are the bills you can pay.  It's kind of a game here.  You can list the place for cheaper rent and then add the amount in, which I am not a fan of, or just list the rent with the sewer and garbage included and tell them the water bill will be added to the rent every two months when the bill comes.  I usually send them a copy of the water portion.  It's more work but at least you charge them for the water.

Again, you can get them to pay the full bill just ensure it doesn't get behind because you will be liable for it.

[Henry Le]

@David Hutson 

Thanks again!  You're right, it is kind of a game here.  I guess it doesn't hurt to experiment.  I'll do more research by calling the utility companies and asking how they deal with renters.  And will definitely look at the options for water billing.  

Cheers.

[Elizabeth Colegrove]

we live in hanford outside of Fresno. I have found that I cannot increase the rent since there is such a ceiling. They wouldn't read the find print that water is included. What I would do is have them pay me the water bill amount every month. 

[J. Martin]

@Henry Le ,

I've dealt with a bit of utility stuff. I own and landlord in the Bay. 10 units in 2 different utility districts. I put the utilities in my name when I have vacant units I am rehabbing. After I sign a lease, I notify the water and electric/gas companies that the tenant moved in on XX/XX date, and will be taking over the utilities. Then give the utility info to the tenants. My experience is that they use that lease date (and may ask you to send it if there is a dispute with the tenant over the date).

I have individually metered water on this 4plex, and in that case, the owner is not responsible for any prior bills. Same with PG&E. It follows the prior customer, not the property. BUT THIS DIFFERS FROM LOCATION TO LOCATION. Call and tell them what meters you have (or ask them), and ask if you would be responsible if the tenant doesn't pay, along with noting any tenant move-in dates. They can usually store the info in the system.

Also, I recommend asking about any old bills on ALL of the meters when you buy a place. They told me I wasn't responsible for prior tenant bills, but I didn't know that someone had repeatedly turned on the meter w/o utility's permission during foreclosure, and they were about to come remove the meter! Even though my tenant was in the unit w/ water running! Crazy story, but nothing happened. All was well.

And I agree with @Elizabeth Colegrove , if they are individually metered, have the tenants pay for it. People mostly focus on the headline number when they are renting, and don't totally factor in utility costs. In addition, they use a lot less when they are responsible. I've seen some crazy things when there is no accountability on usage..

Call each company!
The city usually lists the utility companies for each area, if they're not all the same.
Good luck!

[Amanda Hoening]

Where I am you have to have the tenant call in and put them in their name.  It has been my practice in the past not to allow them to move in until I have confirmed they have them switched.  I don't personally like to have utilities turned off, even if its for a day or two. 

[J. Martin]

@Henry Le ,

As a note, when I recently asked East Bay Municipal Utility District about the cost of water meters, just b/c I was curious, $20K/meter to install. And that doesn't include any re-rerouting or separating of pipes to units. Just for them to come attach it outside your building.

From a valuation perspective though, think of it this way: how much will you pay in utilities, versus the difference in rent? What is the GRM or cap rate associated with that amount of revenue/profit? What is the value to you in the difference in expenses (and less variability in expenses, to some extent?), given what the extra income/revenue is worth?

For individually metered water in my area, especially with washers and dryers, I value it at about $25K-40K, depending on the property, for a 4plex. Electricity is almost always individually metered (unless it's an illegal conversion, or sometimes approved add-on). Gas is usually, but not always, especially if there's no gas appliances and a  single gas water heater. I have that on one 4plex, but the gas is cheap. Then there's master electric and water. Outside lights, water for exterior, coin-op washer dryer..

[Henry Le]

@Elizabeth Colegrove 

Thank you thank you thank you!  You guys and gals are fantastic with all this info.  I greatly appreciate it, I really do!  =)

That puts me at ease.  It seems best to have the tenants pay for utilities.  And I'll just call the utility companies to see how their process works.  I'm not sure why I was over thinking this. 

Thanks again!

[Elizabeth Colegrove]

Henry, my only piece of advice unfortunately learned the hard way. Have your tenants sign a policy regarding the specific utility policy so there is no questions.

[Henry Le]

Originally posted by @Elizabeth Colegrove:

Henry, my only piece of advice unfortunately learned the hard way. Have your tenants sign a policy regarding the specific utility policy so there is no questions.

 Thanks, I'll be sure to research about including certain utility specifications in the agreement.  Hopefully I can learn from your mistake.  Thanks again! =)

[Bill Bell]

In NC with DOM Power, we have an account designation titled "Revert to Owner" for rental properties.  Basically, it allows for easy transition of the account from owner to renter and back, however, ultimately the owner is responsible for any unpaid bills.  Though hopefully the security deposit should handle any outstanding/unpaid bills.  

Note, regarding SD, in NC, 2x rent is the maximum SD draw allowed.  I have starting requiring that amount rather than 1x rent.  Additionally, the SD may be held for a total of 30 days per state code, or longer based on the lease.  This will allow time following tenant exit to receive all outstanding utility bills and/or address any other issues associated with the property following tenant exit.  It also allows continued contact with the vacated tenant for a period of time in case any other issues arise which requires their attention, or your ability to find them.

[Rolanda Eldridge]

I don't turn over keys until utilities transferred into tenants name.  Tenants responsibility to transfer service..

[Steve Babiak]

Originally posted by @Bill Bell:

In NC with DOM Power, we have an account designation titled "Revert to Owner" for rental properties.  Basically, it allows for easy transition of the account from owner to renter and back, however, ultimately the owner is responsible for any unpaid bills.  ...

The problem with this arrangement happens when the tenant does the disconnect while still living there. You can't shut off the utilities because that is considered self help eviction.  And you'll be going through a real eviction most likely when this arises. 

It does work great with great tenants, but you have to always be prepared that the tenant might not turn out to always be great. 

[Pedro Machin]

Henry, the best way I have found after speaking with a contact in the city is to have a separate signed authorization document that the tenant can take to the city to turn on their water, garbage, and sewer. The electric company in my state (FL) does not require any documentation. Like others have said, make sure they get receipts/confirmation or call to confirm. This is the only way I known how to get everything turned on in their name before lease signing. (I used to have, tenant must turn on utilities within 7 days, but the only way that may be enforced if they don't perform is through an eviction).

[Jeremy H.]

Sorry to bring up older post.  I just called the garbage service and they told me to have the tenants call in and apply start service date.   But I was told if the tenants don't pay the bill and go into collections, I will be getting a collections letter and I will be responsible since I am the property owner.

Not that there is much I could do, but does that sound right to you guys?

As far as things like electricity (PG&E here)  is there a way to seamlessly transfer without them turning off the service.  for example, I may need the utility up to the 30th and I find it troublesome to have them turn off so it could be turned on again on the 1st