Rental Utilities- who should pay?

Question

We are looking for deals, but the question comes: should tenants pay for utilities: mainly electric & heating oil or would you have the expenses calculated in the monthly rent? We bounced this back an forth but need some other opinions.

Rachel Jacobson · Answer

It depends on your area. Research properties similar to yours and find out what the tenant pays for and what the landlord pays for. Some states may have local laws dictating who should pay for certain utilities.

I would caution against including all utilities in the rent price. If your tenants ever go over their normal usage, you're the one who will end up paying. Furthermore, they have less incentive to be judicious with utility usage if they know they only have to pay a fixed rate each month.

PJ M. · Answer

This depends on local customs as well as local laws.  When I started 20 years ago in the Philly area, all utilities were paid for by the tenant except for water.  That was kept in the landlord's name and paid for by the landlord.  Now, it still remains in the landlord's name (as it is a lienable item here), but the costs are paid for by the tenant.

We've also got laws in place that prevent charging tenants for utility usage unless they are separately metered.  I believe the New York City has a similar requirement.  Get to know the area you are in.  See what the competition is offering/requiring and most importantly, learn your local laws to see if they have requirements you must follow.

John Underwood · Answer

My tenants pay for ALL utilities including trash pickup where applicable.

Ross Leavitt · Answer

@Lauren Simmers find your local landlord association. Just google it. Then tell them you’re getting started as a landlord and would like to come to their next meeting. They will be very helpful with all your questions! Many of the things you’re asking about really depend on local customs, so as much as we’d like to answer them, local help would be better on these issues.

Kenny Dahill · Answer

I live in Arizona, our electric bills during the summer can range from $200-500 depending on the HVAC unit, the temp inside the house and what hours of the day you're cooling the house.  A key component to real estate is risk mitigation, I do not feel comfortable assuming the risk that my tenants be responsible for the AC when I'm footing the bill.  Therefore, tenants always pay utilities.

My only exceptions are my townhouses that the HOA bills the water per unit.

Maya Roberts · Answer

I agree with @Kenny Dahill, different regions can have unique weather and utility expenses.  For example, midwest winters and paying for the heat.

We always have our tenants pay for the utilities.  Sometimes we have to keep the utilities in our names when it's vacant but we transfer the account immediately to the new tenants.

Jonathan W. · Answer

@Lauren Simmers you tenant should but most of not all utilities. Any psychology book or common sense even will tell you, if you pay for water, gas or electricity, they will abuse the crap out of it. If I was in bed and I realized a window was open with the AC on and it was free, I ain’t getting up to close it.

Sometimes trash or sewage is paid by the owner or included in the rent price.

We don’t charge our tenants the HOA fee but if landscaping is needed that is something they pay as an addition to rent.

Charles Carillo · Answer

@Lauren Simmers

In a perfect world tenants should pay for all utilities but most rentals are setup where the tenants pay electric but sometimes the heat and hot water are included; common with older buildings. It is much more expensive to individually meter hot water and heat on older buildings that are currently being paid by the owner. Make sure at least the electric is paid by the tenants and you have accounted for the heat and hot water costs in your estimates.

Tina Pauley · Answer

Our tenants pay all the utilities. We set up the utilities to revert to owner, so if the tenants move out the utilities are still covered. With our rentals we had is Arizona, this was important, as you didn't want the property to have no AC running when it was 115 outside. We did cover the HOA fees.

Anthony Rosa · Answer

In a SF it's easy to pass on the utility bills to the tenant. In multi family houses utility bills can't be separated fairly unless it's separately metered.

Typically, it's water and sometimes gas that isn't metered separately.   For gas, install a thermostat outside the home so tenants can't control the heat in the winter.  Use an electric HW heater and electric stove instead of gas. For Water, install showers instead of bathtubs and shut off outside water spigots.

Rental Utilities- who should pay?

Most Popular Reply