Common Area Utilities

My latest building has 11 units. It is master-metered for heat, hot water, and common area lighting. Each unit gets its own utility bill for electricity.

I have been taking the common area bills and back-billing the tenants by apartment, so they pay 1/11th of the bill. $200 bill? $18.18 each.

But what happens when a unit or units add another tenant or occupant? They are all passively using the common area lighting, etc. But more importantly, they are using a lot more hot water for showers, shaving, cooking, and dishwashing. That's not fair to people in the other units.

So, I told them that I was going to do what I do elsewhere - charge by the tenant/occupant. So now with 2 additional occupants in two apartments, it would go 13 ways (13 "billing units") and I would bill the apartments with 2 people

for 2 "heating units" each. So for that $200 bill, it would be $15.38 for the singles and $30.76 for the doubles.

One M-T-M guy has a problem with it.

Your thoughts? How would you (or do you) handle this kind of billing? RUBS isn't an option.

--98.245.xx.xx

Common Area Utilities (by Ken [NY]) Posted on: Sep 13, 2018 7:54 PM
Message:

I think you should just raise the rent $20 to cover the bill and $50 month for any one else who moves into a unit.Is it even legal to charge each unit a percentage of the bill? not to mention it seems like a lot of extra work to collect that extra amount from each tenant --72.231.xxx.xxx

Common Area Utilities (by Jeff [CO]) Posted on: Sep 13, 2018 7:59 PM
Message:

I'm sure it's legal to do that as long as I don't profit from back-billing the tenants for utility use. I would become a utility company if I did that.

Raising the rent doesn't solve the problem. The tenants pay 100% of the utilities. There is also a huge swing in utility costs in a winter month vs. a summer month.

Also, there is very little work involved. I scan the utility bill and e-mail it to the tenants. --98.245.xx.xx

Common Area Utilities (by fred [CA]) Posted on: Sep 13, 2018 8:48 PM
Message:

I'm sure it's legal, but it looks like you are nickle and dime them.

Just stay with per apt billing. Next time the complaining tenant mentions it again, tell him to come up with a better arrangement. --99.59.x.xxx

Common Area Utilities (by RathdrumGal [ID]) Posted on: Sep 13, 2018 9:02 PM
Message:

My daughter used to rent from a large apartment complex in Federal Way, WA. Their rent was based on 1 person per apartment. For every additional person, they had a $40/month "utility" charge. --98.146.xxx.xxx

Common Area Utilities (by cjo:-'h [CT]) Posted on: Sep 13, 2018 9:20 PM
Message:

In my lease each additional person not on lease at original signing will be charged $100.00 per month,keeps down on overcrowding..........charlie................ --32.214.xxx.xx

Common Area Utilities (by BRAD 20,000 [IN]) Posted on: Sep 13, 2018 10:08 PM
Message:

Jeff,

If the MTM guy is single he should be glad you are charging by the person. Keeps his portion lower.

Shopping centers charge shop leasees a cama fee- for parking lot maint, exterior lighting, trash, etc. Common Area Maint Acct.

Me? I like simple. I’d add a cama fee to each apt, same small amount each month. We do that for our multis. $50 per month for water, sewer, trash.

BRAD --68.50.xxx.xxx

Common Area Utilities (by Vee [OH]) Posted on: Sep 14, 2018 4:45 AM
Message:

It sounds like the cost of doing business, I buy milk at 4 different places and have never encountered a utility allowance for a half gallon or gallon, but if you have operated like this then just stay with the door count - but what happens when there is a vacancy? Do you charge the repair people for using the lights? Of course the cost will rise as power used to run the boiler goes up when the temp goes down. --76.188.xxx.xx

Common Area Utilities (by NE [PA]) Posted on: Sep 14, 2018 5:02 AM
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Why would a landlord back bill common area lighting to tenants divided by number of tenants in the unit? A bill like that should just be absorbed in the general operating costs. --50.32.xxx.xxx

Common Area Utilities (by Rich [PA]) Posted on: Sep 14, 2018 5:28 AM
Message:

As a landlord, I like to keep things as simple as possible. As a consumer (or when I was a tenant), I always dislike when I am getting nickeled and dimed.

In PA, based on my understanding of our PA Landlord / Tenant Act, charging tenants for their fair (?) share of common utilities would not hold up in court.

I have a very similar building - 8 1-bedroom units - and I pay for all utilities (radiator heat, cooking gas, water/sewer, common electric and trash hauling). I just build these extra costs into the rent when setting my annual rent amounts in the leases. I market my units in this building to prospective tenants as "All major utilities included, all you pay is your monthly rent and unit electric!" Tenants enjoy the simple accounting and I do not have to chase tenants for small and somewhat arbitrary amounts or deal with petty issues like someone else in the building takes longer showers or has lots of guests.

I prefer spending my time handling / verifying collection of 8 $800 checks vs (say) 8 $780 rent checks and 8 additional checks of a to-be-determined amounts.

--108.17.xxx.xxx

Common Area Utilities (by Nellie [ME]) Posted on: Sep 14, 2018 5:38 AM
Message:

In Maine this would not be legal. One tenant takes a 10 minute shower and keeps his heat at 62 degrees. Additionally, he is gone 2 weeks a month because his job requires him to travel extensively. The tenant in the next apartment takes a 25 minutes shower and likes the thermostat set at 72 degrees. So tenant 1 subsidizes tenant 2 and over billed for his usage. You have no way to determine who uses what. --68.238.xx.xxx

Common Area Utilities (by Jeff [CO]) Posted on: Sep 14, 2018 6:10 AM
Message:

When there is a vacancy, the bill-back system stays the same, but I carry the costs for that unit - both the common area and the individually-metered one.

Again, the TENANTS are paying the utilities. My goal is to spread it out fairly. Two people in one unit use a lot more hot water than one. --98.245.xx.xx

Common Area Utilities (by AllyM [NJ]) Posted on: Sep 14, 2018 6:34 AM
Message:

No, you can't do that. Take the amount off your taxes on Schedule E. I have never heard of such a thing. That is unprofessional and really, just plain cheap. Plus the fact that some tenants may benefit more by one common area item than another so why should they pay for that? If a light bulb goes off are you going to subtract from the bill for the day or two it takes to get the bulb back on? If you are in such awful financial trouble that you feel you should to that, then sell the building. --73.178.xxx.xx

Common Area Utilities (by LindaJ [NY]) Posted on: Sep 14, 2018 8:45 AM
Message:

The common area utilities do not change with more tenants in a unit. That is your cost of doing business, you should absorb that. As for each unit, 2 people may not necessarily use more electric than one. Lights, cooking and those things may very well be the same. Hot water, charging electronics may change. But either way, you are not charging by actual use since some may overall use more than others normally. (ex. Leave all the lights on for the evening vs only a small one in the room they are in. Heavy TV watchers vs little. Traveling vs stay at home.) So dividing that by unit or people is not fair anyway.

Also your calculation of the extra person is not fair. (divide by 13 instead of 12) It isn't a whole 'nother unit. (same lights are on, same TV being watch.)

Raise the rent to cover your utilities, or break them out or possibly just leave it alone. If you go with this new calculation you may be opening a can of worms that could cost you more in the end --108.44.xx.xx

Common Area Utilities (by LindaJ [NY]) Posted on: Sep 14, 2018 8:47 AM
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Oh and what does your lease say?? You can't change that on a whim. You will have to wait until they are up for renewal or new tenants. --108.44.xx.xx

Common Area Utilities (by Robin [WI]) Posted on: Sep 14, 2018 8:47 AM
Message:

This is tricky. It could be argued that two people don't use any more heat or common area lighting, but DO use more hot water.

I like the idea of billing a flat rate per apartment, plus a $XX/person utility charge. Average it out across the year so that the tenants can budget better. Tracking each varying utility amount due seems like a bookkeeping nightmare... --204.210.xxx.xxx

Common Area Utilities (by Jeff [CO]) Posted on: Sep 14, 2018 8:52 AM
Message:

Linda, I am looking at modifying this practices, which is why I posted this. But this has NOTHING TO DO with the cost of business. As I keep saying, the TENANTS pay for the utilities - not me. Units with one occupant shouldn't pay the same as those with two for common area stuff like hot water, lighting, and heat. They don't use as much.

As I also said, the units are individually metered for electricity. The tenants pay the utility directly for that.

I don't gain or lose anything by this. I am looking to more fairly charge the TENANTS. Again, RUBS isn't an option.

--98.245.xx.xx

Common Area Utilities (by elliot [RI]) Posted on: Sep 14, 2018 4:36 PM
Message:

It's illegal in RI as well.. Unless you can prove the consumption was equal, then it is unfair and I suspect it won't stand in the court.. --71.232.xxx.xxx

Common Area Utilities (by Jeff [CO]) Posted on: Sep 14, 2018 4:38 PM
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It's not going to court, and that isn't what the post is about. If you don't have anything constructive to add it's best to not say anything. --98.245.xx.xx

Common Area Utilities (by Joy [MI]) Posted on: Sep 14, 2018 4:57 PM
Message:

We have a duplex in a similar situation. We divide the water bill by the number of persons living in the house, so the 1 bdrm pays 1/4th whereas the 3 bdrm pays 3/4th.

The heating bill is split by sq footage of each unit (1/3 and 2/3). So far no-one has complained. --107.4.xx.xx

Common Area Utilities (by Johnny B. [MA]) Posted on: Sep 15, 2018 4:03 AM
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The tenants should not pay the utilities in this situation. Regardless of if you bill by door or by occupant it’s not an accurate representation of each apartments true usage. That’s why this approach is illegal in many states, MA included. --24.147.xx.xxx

Common Area Utilities (by LindaJ [NY]) Posted on: Sep 15, 2018 6:10 AM
Message:

Jeff, maybe you aren't taking it to court, but your tenants could if they find your not following the laws or agreements you have. So keep that in mind if you swat the hornet's nest.

As for telling someone not to answer... if you don't the answers that are given, don't ask the question or if you don't like what someone said, just ignore it, you don't have to get cranky. We are only giving our ideas and opinions and that is what this forum is about. To find what works for others. --108.44.xx.xx

Common Area Utilities (by Jeff [CO]) Posted on: Sep 15, 2018 6:38 AM
Message:

LindaJ,

It's not that I don't like or like the answers that I am given. It's not helpful at all to not read the original post, derail the subject, and then provide an irrelevant answer. As I said, it's best not to bother responding.

If someone writes and says:

"I have a month-to-month tenant who is noisy. I haven't witnessed it myself, as I rarely go there, but three other tenants in the building have. How should I handle?"

And then I respond with:

"When is there lease up? How do you know they are noisy? You can't act on a whim."

See what I mean?

--73.95.xxx.xxx

Common Area Utilities (by Rich [PA]) Posted on: Sep 15, 2018 6:49 AM
Message:

If one or all of the tenants bring this issue to the court house, you will likely lose. I have a friend who took his landlord to PA small claims court over this very issue and the court determined that the billings were not based on individual use and was considered arbitrary. Landlord was required to refund all common utility costs paid by the tenant back to the inception of his tenancy. Only way to legally (via the PA Landlord Tenant Act)bill tenants is if individually metered.

So your system, which may seem fair to a reasonable person, is not allowed per Landlord / Tenant statutes. With 11 units, you have a lot to lose if you have to refund all 11 units for even one year - approx. $2400!

--108.17.xxx.xxx

Common Area Utilities (by Jeff [CO]) Posted on: Sep 15, 2018 7:17 AM
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Again, this isn't a court matter. If it were to become one, which is VERY unlikely, it only affects two units in the building. The others, who would be paying less, are unlikely t to mind very much. --73.95.xxx.xxx

Common Area Utilities (by Robert,OntarioCanada [ON]) Posted on: Sep 15, 2018 10:13 AM
Message:

Convert the entire building to individual meters where over time the expense will pay off as the value of the apartment building increases. Get a few estimates from different electricians. If the lighting in the hallways is converted to LED lights then the consumption will drop. If the utility belongs to the tenant then the consumption drops as when they go out lights go off, Tv goes off and so on. --147.194.xxx.xx

Common Area Utilities (by Jeff [CO]) Posted on: Sep 15, 2018 10:19 AM
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Common area lighting is already LED. Please tell me how I go with individual metering in a building that has one boiler and one gas water heater. I'm interested in that kind of solution. --73.95.xxx.xx

Common Area Utilities (by DJ [VA]) Posted on: Sep 15, 2018 3:02 PM
Message:

My thoughts:

EVERYTHING is the cost of doing business, and ideally ALL those costs (and more!) are paid by the tenants. I, also, have made calculations for utility expenses based on the number of occupants (for water/sewer/cooking), and square footage (for heat). This information is used as a "rule of thumb" for determining the rent for each unit. Use it to average out the expenses for the entire year, and just add it to the rent. Keep the rental amount consistent from month to month. Or else it does look like "nickel & dining" which could frustrate otherwise decent tenants and cause angst where there need not be any.

It's the same as taking into account all operating expenses, purchase price, market rents, etc - to determine if a place is a good investment, and how much profit you will make before you even buy it. I consider common area utilities as one of those things you need to calculate as a factor in setting the rent.

For example: Base rate for a 2 BR with 3 occupants is $xx rent. If there are 4 occupants, it is $xx + $25.

Kept as simple as possible for the tenants to get their rent in the right amount to you on time.

What is RUBS?

--68.10.xxx.x

Common Area Utilities (by Nellie [ME]) Posted on: Sep 15, 2018 4:46 PM
Message:

As much as you say this is not going to court you are playing with fire. It is just a matter of time. All you need is one tenant who complains to the courts and the judge will say “no, you can’t do it that way.”

It’s really too bad there has not been a response from a CO landlord who knows your state’s laws. But a number of states clears do not allow what you are doing. Continue at your own risk or bury those costs into your regular rent. --68.238.xx.xxx

Common Area Utilities (by Robert,OntarioCanada [ON]) Posted on: Sep 15, 2018 6:26 PM
Message:

Separating out electricity is easily done by installing individual meters for each rental unit. Improving the efficiency of heating system can be done by installing a electronic boiler controls, indirect hot water tank which has a standby loss of less then one degree per hour, installing non-electric locking thermostatic valves on the radiators which will limit the heat into the rental unit. Insulating all the heating, hot water pipes in the boiler room is minimal cost but will reduce natural gas bills. If there are copper finned baseboard radiator then using a shop vac to clean out dust then install reflective tape to put more heat in the room. Electronic boiler controls the outside temperature can be set where the heat will turn off and circulation pumps on warmer days and nights. Tekmar manufactures electronic boiler controls, non-electric thermostatic radiator valves made by Danfoss or Honeywell Braukman. There many videos on You Tube about insulation upgrades, indirect hot water tanks, boilers, non-electric thermostatic radiator valves . It would be very expensive to install high efficiency wall mounted gas boilers in each rental unit. --147.194.xxx.xx

Common Area Utilities (by Jeff [CO]) Posted on: Sep 15, 2018 8:30 PM
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As I have said, the units are already individually metered for electrical use. --73.95.xxx.xxx

Common Area Utilities (by LordZen [MA]) Posted on: Sep 21, 2018 4:21 PM
Message:

Too mch information to handle, this is very confusing as a new LL :/.

Rober OntarioCanada i like your recommendations, very good.

DJ [VA] i also like your thoughts. --73.159.xxx.xxx

Common Area Utilities (by Still Learning [NH]) Posted on: Sep 22, 2018 5:10 AM
Message:

I do this for water and sewer at 1 building. It was sold with existing tenants splitting the bill. I copy the bill and divide by 5 units and invoice tenants. Sometimes I think it is more work than it is worth but my rents are already pushing the limits. The lease reads 20% if bill paid by them. I am on top of plumbing repairs, calculate the usage every month to make sure there are not spikes. If I pressure wash or we change out a hot water tank, take an extra week to address a drip, I take money off the bill. I explain this at showings and anyone that doesn’t like it doesn’t have to rent it. I do give them the monthly average and explain it is dependent on the number of days the city bills for. A few question numbers of people per unit. In my opinion that makes the can of worms larger because the single person’s significant other is sleeping over several nights a week and only being billed for one, a single parent has their 3 kids every weekend and is only being billed for one, the couple being billed for 2 both travel all week and are only home for weekends, etc. My units are all the same # of bedrooms. --24.61.xxx.xx

Common Area Utilities (by Nicole [PA]) Posted on: Sep 22, 2018 6:17 AM
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I had a 4 unit property that I paid utilities. Dividing and explaining was too much work for me. I took the average annual bill and divided by 5 - one part for each tenant and one part for me to take up any "adjustments" several above have listed. I didn't explain anything to tenants other than $xxx is your monthly payment for utilities... I adjusted it annually or inched it upwards if necessary with turn overs. --72.70.xxx.x

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Common Area Utilities

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