Tenant in nice property not paying utilities

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Tenant in nice property not paying utilities

Tanya F.
Rental Property Investor · Madison, WI · Member since 2013 · 629 posts · 339 votes

We had new tenants move in this past April into an A/B property and we learned they haven't been paying the gas bill.  Their credit was 675 and income was good and all references checked out as excellent.  We include the electric and water utility in the rent, but the tenants pay the gas. We've done it this way for many previous lease terms, but we may change that after this experience.

They made no gas payments since moving in. In the summer, the only gas used is for the hot water heater, and the water going to the hot water heater is preheated by solar. So the summer gas bill is tiny in terms of therms of gas used, but there's a ~$20 fixed distribution charge, which is pretty standard as far as I can tell. So (maybe because they are rebels?)  they decided not to pay, and the gas was shut off two weeks ago. The house is plumbed strangely so one of the two water heaters is shared, so other tenants had no hot water (there were a series of cloudy days).   Those other tenants pay the gas for the shared clothes dryer. 

So the bill should be in our name.  We don't want to get into a battle. We're looking for help here in drafting a letter to them to say how unacceptable this is.  Who knows what other bills they aren't paying.   They need to be told this is serious. This unit is being rented under market rate. So we can raise the rent next spring for sure.

After you have accepted tenants, do you ever re-screen them before renewing? I'm sure their credit rating has tanked after not paying gas since April. They are also supposed to share duties mowing the lawn, and have been slackers in that regard, according to the other tenants.

So, any ideas for wording our letter?

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Marcia Maynard
Investor · Vancouver, WA · Member since 2013 · 3k+ posts · 4k+ votes
10y

It all goes back to the original agreement, as stated in the lease. In your letter, print the clauses that pertain to the issues and give them a timeline for compliance. Serve a "comply or quit" notice at the same time if you want to use a stronger fist and are prepared for a vacancy. But it seems that won't be necessary if indeed they are resolving this with the utility. I would avoid the use of any words that sound judgemental and would stick to facts, cause and effect.

I think it's reasonable to make an accounting of what their non-compliance has cost you and bill them for it. But if there is a gray area, then I would absorb the cost and take a lesson from this experience.

What would it take to correct the plumbing issue and separate the connection between the two units? You know you are on shaky ground if one tenant is paying for utility usage for another. However, since both parties are required to pay a fixed distribution charge and if this problem is not linked to usage, then you can address that head-on.

We pay for water usage at a one of our multifamily properties (an 8-plex) and factor it into the rent. This is because the units are not separately metered. Since yours are separately metered it makes more sense to fix the plumbing issue. If not, include water/sewer in the rent.

Have you considered hiring a landscape maintenance company and factoring that into the rent? We do that for our multi-family properties. Too much can go awry otherwise. It also gives us a chance to have extra eyes on the property.

Whether the rental agreement is MTM or a longer term lease, if all parties agree, then it may be possible to change some of the terms of the agreement even before the end of the term. Everything is negotiable. Put the changes in an addendum or write a new rental agreement. A lease binds you only if one party doesn't want to budge. At least that's the case in my jurisdiction; check with what's legal in yours. If you make changes that result in a win-win, then it is likely you will be able to garner support and mutual agreement.

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  • Nicole A.Pro Member
    Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes
    10y

    Have you called and talked to them yet about this before sending a letter? If they've been good otherwise, perhaps you just need to have a conversation. Hear what they have to say. Don't accuse...because they'll just get defensive. Simply say that it's been brought to your attention that the gas has been shut off and you're wondering what happened.

    If they tell you they're just refusing to pay because of whatever reason...perhaps they feel it's unfair for some reason, simply remind them of what the lease states. Again, don't sound accusing. Just professional and neutral.

    Don't take sides too much even though the other tenants told you they don't help mow the grass enough. That is not your problem.

    1Reply
  • Mike CumbieBusiness Member
    REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
    10y

    I would start paying the gas bill until I got the house plumbing changed so your other tenant is not held hostage by the gas usage of the other. You can tell them you are "trying" to get them hot water but...but...but all you want, I doubt a judge would agree.

    1) Stop the bleeding

    2) Fix the issue: (Fix the plumbing)

    3) Prevent from happening again: Once that tenant leaves change the lease wording and cost (or do not renew)

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  • Tanya F.
    OP
    Rental Property Investor · Madison, WI · Member since 2013 · 629 posts · 339 votes
    10y

    We've had some of that conversation, she apologized. She claimed that they didn't realize it would affect anyone else.  (But not paying for 6 months! What were they thinking! Haven't had that part of the conversation yet.)  But he said that it's between them and the utility and it's been resolved. They did pay the outstanding gas bill last Friday.  Their rent has always been on time.

    We made a service call for a plumber, that's how we learned  that the gas was shut off. Our response to the plumber was WHAT???!!!   I think that they should pay for that service call, - we haven't received the bill yet - but maybe the plumber will decide to be nice.   Or maybe we should eat that cost.  

    I just want a nice way to illustrate the gravity of the situation. And my gut feeling is that it should be in writing.

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  • Marcia Maynard
    Investor · Vancouver, WA · Member since 2013 · 3k+ posts · 4k+ votes
    10y

    It all goes back to the original agreement, as stated in the lease. In your letter, print the clauses that pertain to the issues and give them a timeline for compliance. Serve a "comply or quit" notice at the same time if you want to use a stronger fist and are prepared for a vacancy. But it seems that won't be necessary if indeed they are resolving this with the utility. I would avoid the use of any words that sound judgemental and would stick to facts, cause and effect.

    I think it's reasonable to make an accounting of what their non-compliance has cost you and bill them for it. But if there is a gray area, then I would absorb the cost and take a lesson from this experience.

    What would it take to correct the plumbing issue and separate the connection between the two units? You know you are on shaky ground if one tenant is paying for utility usage for another. However, since both parties are required to pay a fixed distribution charge and if this problem is not linked to usage, then you can address that head-on.

    We pay for water usage at a one of our multifamily properties (an 8-plex) and factor it into the rent. This is because the units are not separately metered. Since yours are separately metered it makes more sense to fix the plumbing issue. If not, include water/sewer in the rent.

    Have you considered hiring a landscape maintenance company and factoring that into the rent? We do that for our multi-family properties. Too much can go awry otherwise. It also gives us a chance to have extra eyes on the property.

    Whether the rental agreement is MTM or a longer term lease, if all parties agree, then it may be possible to change some of the terms of the agreement even before the end of the term. Everything is negotiable. Put the changes in an addendum or write a new rental agreement. A lease binds you only if one party doesn't want to budge. At least that's the case in my jurisdiction; check with what's legal in yours. If you make changes that result in a win-win, then it is likely you will be able to garner support and mutual agreement.

    3Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    10y

    IMO any time a utility cannot be correctly parceled to the proper user in a multiple unit situation, the landlord should carry the full burden of payment. Why should one tenant go without because the other one didn't pay? Who used how much of what, and how much should each pay? Is the dryer more expensive than the HWH? Who knows? 

    Same thing goes for common areas, which must exist if it's a multi-family unit with a lawn to be mowed. Maybe we have different definitions of what constitutes A type housing, because that sounds like a fairly low credit score for someone like that, and a multi-family with shared plumbed utilities sounds like an old house someone put a wall down the middle of to turn into 2 units. Anyway, in a multi-family situation, I would mow the lawn and that cost would be part of the monthly rent charges when I set the amount. On a SFH, I have a clause that addresses mowing, that if the tenant declines lawn services (we offer it) they are required to keep the grass cut no less often than every 2 weeks, and on our info sheet we let them know that if we get more than 1 citation for grass not being cut by the municipality, or if we get one and they do not address it within 48 hours, we will take over lawn care duties during the cutting season (March-October) and will bill the tenant for those charges.

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  • Tanya F.
    OP
    Rental Property Investor · Madison, WI · Member since 2013 · 629 posts · 339 votes
    10y

    Thanks for the good suggestions.  We will certainly put the bill in our name.  The issue here is more that we were able to have it set up this way for 15 years, and now we have our first problem.  I suppose it had to happen sooner or later. Previous tenants just paid their bills. 

    The plumbing is too complicated to fix without a large expense. We will most likely leave the water heater arrangement alone, keep the one gas meter in our name, and in future will move the dryer over to the one gas meter we're paying for. Then the units will be isolated. We'll just have to work out what they'll pay us and put it in an addendum to the lease.

    We've always (15 years) had our tenants take care of the lawn and snow shoveling, with clearly spelled out penalties in the lease, but maybe the tenants now are preferring things to be done for them. We'll play that one by ear. We encourage gardening and that usually comes with good general landscaping responsibility. (key word - usually)

    Yes, it's an old house (built 1914), but it's always been a 2-unit. 

    It still just irks me that these guys didn't pay their own gas bill for such a long time. Even if nothing was shared. It's an attitude that spells trouble. We wouldn't have rented to them if they'd had this on their credit report.

    I like Marcia's and Nicole's points- the lease states that tenants will pay the gas, so they are non-compliant.  Maybe we'll come up with a draft tomorrow.  Marcia- we do pay water/sewer for the building, that's not separately metered.  There are two gas meters - it's just that the hot water heater arrangement that is strange. Since the solar HW system preheats the water feeding the gas HWHs to over 100F every sunny day, most days it would be a very minor issue. But when it's overcast - there's the problem.

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  • Marcia Maynard
    Investor · Vancouver, WA · Member since 2013 · 3k+ posts · 4k+ votes
    10y

    @Tanya F. Oh right, it was the GAS bill that went unpaid, not the water bill. I got distracted by the bit about the hot water heater and plumber. It is rather an odd situation, but glad you got it handled. I'm guessing if they had a gas range in the kitchen, they would have kept current on the gas bill. :-)

    Tenants sometimes surprise us too. Most of our units have central heating forced air heat, good furnaces (9 are natural gas and 1 is oil) and good air ducts. Using the heating system as it was designed keeps the units toasty and the movement of air prevents mold and mildew. This is especially important during our wet winters here in the Pacific Northwest. Occasionally we will have a tenant who shuts off the heating system and starts using portable electric heaters. This makes me nervous. We have it in our rental agreement that portable heating units are not allowed unless the tenant obtains prior written consent from the landlord. Then we can check the safety features of the heater and make sure the tenant is using it properly. Sometimes the tenant just wants zonal heat (heating one room instead of the whole apartment) and that is why they think it's a good idea to use electric space heaters. I point out that the rental agreement requires them to maintain the temperature in the whole apartment or house at no less than 55 degrees and air flow is important to keep things dry. Also, heating the entire unit with natural gas is less expensive than using electric spaces heaters! Natural gas prices went down again this year! Yeah!

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  • Tanya F.
    OP
    Rental Property Investor · Madison, WI · Member since 2013 · 629 posts · 339 votes
    10y

    Thanks, Marcia.

    When our previous tenants used space heaters, it was extremely obvious in the electric bill. We sent them a bar graph of their usage and literature from the utility that explained nicely how much less it costs to heat the unit with gas as opposed to space heaters. End of space heater use.

    0Reply
  • Kyle Hipp
    Investor · Appleton, WI · Member since 2012 · 1k+ posts · 464 votes
    10y

    Unless you have in the lease that the tenant is paying for a shared appliance the tenant can request that the utility perform a free audit to confirm this and you could be on the hook for up to 3 years back of utilities. Sounds like there is already separate gas meters so all it would mean is a little bit of piping and if it is all in the basement it should be a relatively easy job.

    0Reply
  • Tanya F.
    OP
    Rental Property Investor · Madison, WI · Member since 2013 · 629 posts · 339 votes
    10y

    Following up a couple of months later. . . .

    We wrote a letter to the tenants saying we'd like to discuss.   We proposed to modify the lease putting the gas utility in our name, with a monthly increase of $85 to include gas utility for the remainder of the lease term. This ~$85 is an estimated rate, based on previous tenants' usage (old tenants shared their utility bill information with us).  These current tenants didn't respond right away, but eventually told us they'd like to keep things as they are, so they'll be paying their own gas.  Keeping in control. They haven't been there over a winter yet.

    Since then, they've been on their best behavior - they've been the first of all of our 6 sets of tenants to pay the monthly rent, two months in a row.  We ate the plumber bill for now ($116)  :-(  but will increase rent this summer and that will cover it in the long term.

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