Rental Property Investor · Seattle, WA · Member since 2016 · 524 posts · 148 votes
Okay so I'm about to close on a property with 36 tenants. My plan is after closing I'm going to install water sub-meters so I can bill back the water and sewer bills to the tenants. I will send out an Addendum (with some new terms) and a 30-day notice 30 days before implimenting all the changes. Currently there some tenants in the middle of their 12-month lease and the current owner put them on auto-renewing leases. I know that I can start billing back the w/s bills to the month-to-month tenants after 30 days. But I'll have to wait for the other tenants that are still in the middle of their 12-month lease to expire first before I can start to bill them back the w/s.
So my question is:
Can I still bill back the water and sewer bills to the tenants that just had their 12-month leases expire even if they're on auto-renewing leases? In other words if today is the last day of John Anderson's lease, then tomorrow the lease will auto-renew for another 12 months - can I start billing back the w/s to him? The auto-renewing component of the lease shouldn't prevent me from billing him back the w/s bills, right?
Investor · Pittsburgh, PA · Member since 2015 · 1k+ posts · 1k+ votes
8y
@Gulliver R.@Joe P. I think Joe has a valid point. You need to first of all make sure when you do separately meter the water that indeed the tenant is only paying for their usage and not another tenant or not the laundry facilities etc.
Also go through an attorney to make absolutely sure the verbiage on your current lease allows for immediate change in the utility billing.
Investor · Pittsburgh, PA · Member since 2015 · 1k+ posts · 1k+ votes
8y
@Gulliver R. As soon as the lease expires you can have the tenant sign a new lease and bill back the water. Until then you cant do it unless there is a clause in the lease that once the property sells the new landlord has a right to end or amend the lease.
Rental Property Investor · Seattle, WA · Member since 2016 · 524 posts · 148 votes
8y
@Alex Deacon can’t I just write up an addendum with some new terms (one of them being tenants must pay for their own w/s after their lease is up)? Which would also serve as a 30 day notice.
@Alex Deacon can’t I just write up an addendum with some new terms (one of them being tenants must pay for their own w/s after their lease is up)? Which would also serve as a 30 day notice.
I would think -- and this comes from someone with zero experience in law OR apartment buildings, that the sale of the property would be outlined in the existing leases, as well as the options thereafter for the new lease-holder; and this would be trumped by landlord/tenant state law.
Given it is such a large purchase and you could potentially be disrupting what is a relatively stable situation, I would consult with a lawyer to determine your options. I'd also see how much this would impact your existing tenants. Change is tough -- this might be something you can implement over time, or implement only with tenant turnover. It'll take longer to hit your numbers but the disruption and potential litigious or tenant-PITA issues that'll come up will be minimized. Just my $0.02.
Investor · Pittsburgh, PA · Member since 2015 · 1k+ posts · 1k+ votes
8y
@Gulliver R.@Joe P. I think Joe has a valid point. You need to first of all make sure when you do separately meter the water that indeed the tenant is only paying for their usage and not another tenant or not the laundry facilities etc.
Also go through an attorney to make absolutely sure the verbiage on your current lease allows for immediate change in the utility billing.
Philadelphia, PA · Member since 2017 · 824 posts · 1k+ votes
8y
Thanks @Alex Deacon, I was thinking about this post some more after I moved on -- @Gulliver R.'s first interaction with these tenants is going to be to install a new water sub-meters and pass along that cost to them, along with a new clause/update to their contract? Ouch.
I know for the smart investors here, it's all about the numbers -- how do increase my CF, COCR, Cap Rate, how do I lower my personal expenses and pass it along to others, etc. -- but you are buying a property with 36 tenants! First off, congrats, but I would imagine stable, long-term, paying, and HAPPY tenants is a good starting point to hitting those numbers. The last thing you want is to introduce new terms and give those happy/long-term tenants an out to their lease.
Oh yeah -- some leases have a clause that says if the landlord changes something, it opens a cancellation window. That's there to protect the tenants from landlords who raise rent unexpectedly, introduce major changes to rules/regulations, etc.
All the more reason to consult your lawyer, determine what the additional costs would be for the tenant, get a sense of how tenants might feel about such a change, etc. I would not go into this with installing and then informing your tenants, who you have basically no relationship with, that they'll get an added water cost every month and there is nothing you can do about it.
Another option would be to bill for utilities but initially drop the rents slightly. Since rents are based on utilities included or not included they should be paying higher rents today to allow for their utilities included. You then bring rents back up over the next couple of years to full market. This will filter out tenants slowly that can not afford to live there and that you do not want anyway.
Rental Property Investor · Seattle, WA · Member since 2016 · 524 posts · 148 votes
8y
@Alex Deacon great input. So what I’ll do is stipulate in the addendum that the Auto-renewing leases will no longer Auto-renew into another 12 month term, but instead will Auto-renew into a month-to-month term. That way I know for sure I can start to bill back the water and sewer to them.
In regards to billing back the water and sewer: it’s very common in this market to bill back the water and sewer to the tenants. It’s not like I’ll be the only community billing back the w/s.
Rental Property Investor · Seattle, WA · Member since 2016 · 524 posts · 148 votes
8y
@Khalil Bachir they range in price depending on what state and city and what you’re looking for technology wise. Contact Southern Water Management, and ABT Water Management. They can give you processing for your property.