ADUs and utility metering

[Mark Torrefiel]

Hello BP family!

I purchased a property in July with a SFH with two ADUs in the back. I did see that SB7 said that multifamily properties would require submeters installed in every unit. For the first question, since I am planning on renting out all units, would the ADUs require submetering? With this in mind, I have seen other property owners use different strategies to bill their tenants for utilities. In my specific case, the tenants pay electricity & gas, but the previous owners were paying for water. I inherited a tenant in the SFH and am working on putting two more tenants in the other two ADUs in the back. So this means, I'm paying for the water that the tenants in the SFH are using. Since I'm trying to cut costs, I do plan on having the next two tenants pay for water as well.

The different strategies that I've heard other property owners use are: RUBS, submetering, metering, or increasing the rent by a certain amount to cover the water bill. Metering is too costly for me at the moment, and the recoupment would take years. Submetering seems reasonable, as the price isn't too terrible, but then I'd have to have the property manager bill them regularly, and at the end of the day, if they do not pay it, then I am still overall responsible for paying it. However, I do intend to add a clause to the lease that discusses the repercussions for nonpayment of the water bill as per the lease. RUBS seems like another easy idea that we'd have to calculate monthly, costs me nothing, and does a fair division of the bill based on the number of people per unit. Lastly, simply raising the rent to cover the water bill seems like the easiest, however, should their portion of the bill exceed the amount I increase their rent by, then it'd be out of my pocket.

I'm kind of at a crossroads here with making a decision and want to hear anyone's experience regarding the topic. Pros and cons of each decision, what worked for you guys, how you made the decision or any other relevant information you have to share regarding the matter. 

Thanks in advance for all your opinions and help! You guys are doing awesome, and don't forget to track those interest rates. They're getting more attractive by the day!

- Mark