Allocating Tenant utilities

Rehabbing, Fix and Flip, Rental Properties
1

I recently purchased a home that has an upstairs In-Law suite. I plan to rent the Downstairs and Upstairs to two separate tenants. The suite has its own separate electic meter, but there is only one gas meter for the whole house. The heat , Hot H20 and oven are all gas. I don’t want to pay the gas because of the obvious problems, but I will probably have to put the gas in The LLC name and bill the tenants. I will allocate the gas bill 65% for the downstairs tenant and 35% for the upstairs based on their respective square footage. Can’t really think of any other solution as I refuse to pay for gas especially with the cold Cleveland winters.
Has anyone else encountered a similiar situation and, if so what was your
solution? Also, there is only one thermostat for the whole house which will be controlled by the downtstairs tenant.

Also, what about billing for the water?. Same solution or does the landlord usually pay that?
Thanks

2

This is a recipe for disaster. Can you imagine what’s going to happen when one tenant likes to keep her thermostat on 80 degrees and the other wants to keep their thermostat low to save money. One tenant is going to be happy that the other is subsidizing their 80 degree apartment. The other tenant is going to refuse to pay for excessive heat they aren’t using. I don’t need these kind of problems.

You made a mistake by purchasing a building without separate utilities. If you can’t get them separated, then raise the rent to cover the utilities and pay them yourself.

Good Luck,

Mike

3

I’ve seen “gas utilities” used for cooking and heating allocated when there is “one thermostat” for the entire building controlled by the landlord.

I owned properties with zoned and central heating. I know friends who owned centrally controlled heated buildings allocating the utility bills, by giving the tenant a copy of the bill with an invoice for the allocation. When I told a friend of mine of this, he laughed said his dad who owned something similar in a college town not only does this, but charges each tenant a $5.00 service charge for the trouble of making the allocation and bill.

If the heating is zoned, I wouldn’t do it, since as “propertymanager” pointed out, someone setting his unit to 80 degrees would run the bill up to the detriment of the other tenants.

Nor would I allocate electric bills either, since the usage varies widely by tenant.

4

Points well taken and after reading both of your posts I got an idea… How about I get a lock box on the thermostat where I set the temp to say 68 or 70. This way I would be in control and can allocate the bill as Frank Chin does. Thoughts?

5

Good luck. I wonder what would happen if the tenant took you to court on that one? In this state the consumer protection laws have triple damages awarded plus court costs. They could claim you overcharged them and then you don’t have meter readings to back up your charges.

Anyway if you read some previous thread, tenants are very crafty when dealing with a locked thermostat. Did you know a bag of ice on top of the locked box does wonders for turning up the heat? Best thing is to really separate out the utilities and then not worry about it or just know that you’re going to have a high heating bill and charge accordingly.

I think the other thing you could do is tell the tenant that the rent increase will be based on how much you pay for fuel for the previous year. If it’s really high it’ll go up a certain amount, if it’s low, it won’t go up so much. Of course that will only work if they’re going to stay in the unit for a while.

6

I own and manage several properties with a “central thermostat” a number a years. We have locks on them, though in most cases a “resident manager” has a key to adjust if needed.

Most of them are building built in the 1950’s or before, with a central heating furnace, and heat is generated either thru a hot water, or steam system. No way it can be zoned.

A word of caution about setting the temperature to 68 to 70 or so degrees. We manage a building for a relative where the heat was set this low, and get constant complaints.

When the temperature is set, it’s the temperature around the thermostat, not the colder regions a floor above, or below, or in the back where the wind blows. We got ourselves a bunch of thermostats, and found that the temperature differences can be as much as 6 to 8 degrees.

When the temperature was set at 68 degrees on the second floor, as was the case in this building, a room on the third floor rear was at 60 degrees. The law requires 66 or above during the day, and the tenant can file a legitimate heat complaint.

What you have to do is balance the heating system, reducing heat at the warmer regions, by changing valves, or shutting off radiators, and increasing the heat at the colder regions. The would reduce temperature differences to 3 degrees or so.

We found we have the least heat compliants if the temperatures are kept at 70 degrees or above in the coldest rooms, meaning the temperature would have to be set in the 73 to 74 degree range, after the heating is balanced. Any less, we’ll get heat complaints, and sure enough, if we leave a thermometer, the temperature will be at 67 degrees or so, if the thermostat is set at 70 degrees.

As to apportioning the utilities, we have tenants agreeing to the procedure in the lease, and actual bills are provided. My dad did that for years and years with no problems.

For most of my buildings, I include the heat though, since this is the normal custom others charge in the area, and tenants prefer a fixed rent a month, and would not rent a place where the heat is separate. So we charge enough to cover the heat.

7

HenryinMa
I would provide the tenants with a copy of the gas bill I received which has the meter readings on it,so I think I would be covered in that respect

8

I have a building like this. It is our previous house. It was once a duplex and after living in it for a year we converted it back to a duplex. The upstairs 3 bedroom unit has no heat control. The only control for the heat is in the downstairs 3 bedroom unit. It also has a 2 bedroom garage apartment. We have to pay all utilities since there is no way to bill them seperate. We do budget billing with public service. (our public service bill covers water, heat, electric all in one bill) this bill is 450.00 month. So I just figured out what I wanted for rent on each unit and added utilitis on top of that. We just add 200.00 each for the 3 bedrooms and 50.00 for the 2 bedroom. We don’t tell them how much we allotted for each unit, we just gave them the total amout of rent and said all utilities were included. We have never had a problem.

But… I did live in the house for 3 years and we were pretty heavy utility users. We had 2 washers and dryers going to keep up on our laundry (we have 5 kids and I use cloth diapers too!) With all the baths and showers and dirty dishes we went through, I can’t imaging the current tenants (with no kids) will make that bill any higher than what we had. The budged billing amount might even go down this year… but I won’t be adjusting the rent down since they don’t really know how much they are paying toward utilities anyway. They never see the bill.