Utility Charge Backs on Month to Month Agreement

[Joe Black]

Hi all, I am interested in purchasing my first commercial multifamily (location central coast California). I am targeting properties with low NOI that have room to grow via rent increases and reductions in expenses (i.e., charging back tenants for utilities). I'd like to hear from you how to best do this.

Specifically, I expect many of the tenants to be on month to month leases. After purchasing the property could I just require all tenants on month to month leases sign 1 year extensions with the new utility chargeback terms + additional rent increases? What worries me is now that California has statewide rent control that I would not be able to charge back utilities after charging the fully allowable rent increase.

I guess to sum it up, my question is:

Is adding a new utility chargeback fee to a new lease which is being used to replace an existing month to month lease, considered a "rent increase", and as a result included in the total rent increase amount that I would be capped under rent control. Hope this makes sense.