Utilities: Who Pays for Them?
Real Property Management’s informative series on rental home management will aid in answering many of the most common questions about landlord responsibilities. This article discusses How to Handle Rental Property Utilities: Who Pays What?
When managing tenants’ move-ins and move-outs, determining the responsibility for utilities can be quite a challenge. Local governments control and regulate utility companies, and many charge substantial shut-off and hook-up expenses, service fees, and trip charges. Plus, failure to maintain utility service may result in service interruption; this may cause property damage such as frozen pipes, inoperative sump pumps, or dead lawns.
To avoid confusion about who pays which utility or service, specifically state in your rental agreement the utilities that are the tenants’ responsibility and the utilities that are “included” in the rental payments. Keep in mind that when a landlord pays for utility service of any kind, limits may not be set for the usage of the utility. A tenant may, as an example, use four times the amount of water the owner ever used (normal usage) on the premises. As the landlord, you may not discontinue the service or charge the tenants for what you feel exceeds “normal” usage. Generally, you should not place sewer or garbage service in a tenant’s name because non-payment could cause a lien on the property.
In the lease agreement, include a thorough explanation of exactly how the tenants make payments, and the consequences for nonpayment. These lease agreement considerations fall under a general “who does what” description that includes who cuts the grass, shovels the snow, pays for cable, and empties the trash. Be specific in your descriptions and follow through with enforcement of lawful terms. It is good practice to provide tenants with a utility contact information sheet that includes phone numbers and location.
Experts recommend that you keep the utilities on until the tenant physically moves in. This is important for the following reasons:
- Move-in dates change, utility connections can take longer than anticipated and other obligations may arise.
- You may wish to make last-minute touches or upgrades to the property.
Contact local utility companies and ask about their landlords’ policy. Most utility companies have provisions to request an automatic transfer (from the tenant to the owner) if the tenant fails to pay a bill. As the master account holder, you would receive notification prior to service disruption. Obtaining highly qualified tenants can be invaluable when it comes to making sure utilities are paid. Many city utility providers require a hefty deposit from renters to assure payments.
If a landlord’s provision like this is not available, consider keeping the utilities in your name and billing the tenants yourself. Doing so may assure the power stays on and you do not suffer unnecessary damage to your property such as frozen pipes or dehydrated lawns.
If you add utility expenses into the rent for a single flat rate, your utility bills will likely run at least 50 percent higher than your historic normal rates. When utilities are combined with rent, tenants often abuse or over-use the utilities. Check with state and local laws to verify if it is lawful to add expenses such as utilities to the rent.
If you have tenants not paying their rent or utility bills and you think you can entice them to move or pay their bills by cutting off the power, reconsider and do not do it. Shutting off utilities infringes on renters’ rights to essential services. The tenants may take you to court for breach of contract and sue you for actual and consequential damages. Ensure you comply with all federal, state, and local laws.
Before they move out, remind tenants that ALL utilities must remain on in order to have a successful move-out inspection.
Real Property Management is the nation’s leading property management business; we know how to effectively deal with utilities and reluctant tenants. The Real Property Management tenant lease agreement is the result of decades of experience. Our tenant selection process aides in obtaining the best tenants for your property, helping you to avoid legal and monetary disputes.
Give us a call or visit the Real Property Management office locator to find the local property management experts.