San Jose Rent Control & Utility bill

[Charles Kim]

Hey Guys, I am looking at buying a 4 plex multi-family house in SJ and wanted to get some clarity on the Utility bill in rent control units.

Land load is currently responsible for the following costs:

- Common area PG&E : $1,300/year

- Water : $1,300/year

- Garbage : $2,200/year

- Pay a tenant to push garbage trash can to street $15/weekly

Tenant pay their PG&E and Rents, all tenants are almost staying there for around 10 years.

I understand 5% max rent increase every year, but I would like to impose on tenant some utility bills to overcome below market price rent.

1. Can I have a new contract that charges tenants for utility costs such as Water and Garbage?

2. Can I terminate a tenant's month-to-month lease, if they don't want to sign the inclduing utility bill payment agreement?

Thank you for the help!!

[Account Closed]

Charles,

To answer your questions, 

1) No, you canNOT have a new contract. You have to honor the existing contract. You are NOT allowed to pass the utilities through to the tenants. This is known as RUBS. It was eliminated in the new 2017 Apartment Rent Ordinance (ARO).

2) No, you cannot terminate the lease without just cause. In the just cause case, you have to pay the tenant relocation fee. This fee is spelled out in the ARO. 

Here are some other points: Based on my experience, the water bill seems low. I would assume these are all 2/1 units. The average water bill should be closer to $40-$50/mo/unit in a working class neighborhood. The common area PG&E can be improved to reduce it to around $60-$70/mo. Trash push and pull for $60/mo is a very reasonable rate.

You’re about to tread on a land mine so tread carefully. Ask if you don’t know. Don’t assume anything. 

Good luck.