This isn't something I really like b/c I can totally see tenants abusing this so I wanted to know how do you handle this?

I don't enforce the late fee provision of our lease typically...until I get to an eviction, which is rare....or there is a pattern of abuse with it.  

I am super proud of that and have an infinite amount of respect for him, but I also saw that money really stresses people out when abused and not respected.

This is covered in our forum rules: H - No Abusive Behavior.

Granted my house isnt an A house or an A neighborhood but its close to UWT, on a bus line, and walkable to 6th ave nightlife which seems like about the market youre talking about going into.

But I do not believe abusing my tenants by taking advantage of them in this way. 

Never take abuse from anyone.

They have been good tenants overall but their use/abuse of the plumbing upstairs is getting expensive.  

I suspect that it is 1 or 2 tenants in particular that have toilets running constantly and/or are just abusing the fact that they don't have to pay for water.  

Is there a good way to prevent tenants from abusing included utilities?