What Utilities Can I & Can't I Bill Back Tenants For?

Question

Hello BP Community,

I'm doing some research into how to analyze utility expenses of small multifamily properties (5-20 units) and I'm confused about which utilities you can & cannot bill back to tenants. I know some landlords in my market (Lansing, MI) who bill parts, and some who are responsible for all of them. Is being able to bill back tenants more of a matter of being able to track the utilities flowing to each unit through meters/implementing a ratio utility billing system to accurately charge tenants? Or is it more dependent on local laws and ordinances? Thank you.

Account Closed · Answer

@Gabe Goudreau

Gabe - I can’t speak on any local regulations but I see no reason why you couldn’t bill back all utilities at the property. How you do that is another matter. In miami for example, most new properties have separate, dedicated electrical and water meters so the tenant can pay directly to the provider based on usage. In some instances there is a direct electrical meter for each tenant, but only one “house” water meter, which the landlord pays directly. If there is only one water meter, you can elect to install a submeter for each unit and recoup water charges from the tenants based on usage. In the submeter scenario, the landlord “fronts” the water bill, and has someone read the submeters each month to divide the bill amongst the tenants. Alternatively, you could bull a flat fee for water.

Trash we usually bill a flat fee per month.

All the above assuming you have the right to collect in your lease. Hope that helps

Nathan Gesner · Answer

Separating the utilities can cost you thousands and may not be feasible. I would need more specific information to give you specific advice, but you can/should generally charge the tenants for utility use. If you just include utilities, the tenants tend to be wasteful because they don't see the bills and their actual use doesn't affect their budget.

I get an average based on historical use, then I split that based on the number of units, size of units, amenities included, etc. For example, I may have a 1bed/1bath apartment with one renter, no dishwasher/washer/dryer and the other unit is a 2bed/1bath with two adults, a dishwasher, and a washer/dryer. Obviously the larger apartment with more people and more appliances will use more utility. Figure out a generally fair split. Bump it 10 - 20% to increase tenant's that abuse the utilities, and then add that charge to their monthly rent. I recommend setting a ceiling (if water is over $XXX in any given month, the excess cost will be passed on to the renters) to catch things like high water bills for running toilets that have gone unreported.

John Underwood · Answer

Get everything metered separately and then have the utilities put in the tenants name.

What Utilities Can I & Can't I Bill Back Tenants For?

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