Utility bills can be a real nightmare if the lease doesn’t cover them correctly. We frequently take over the management of a property that the owner had been paying the utilities for and then billing the tenant. Usually, the owner is having us take over because the tenant didn’t pay them for the utilities, and they don’t know what to do.
There’s a very simple way to avoid this: don’t leave the utilities in your name. Unless absolutely necessary (meaning it’s physically impossible for the tenant to have the utilities in her/her name because of a shared meter), ALWAYS make the tenant put the utilities in his/her name. This should be a provision of your standard lease agreement, and you shouldn’t compromise on it. Tenants will come up with all sorts of excuses for why they want you to keep the utilities in your name. Don’t do it.
Our leases require the tenants to have the utilities switched into their name within 3 days of the start of the lease. We make no exceptions to this. If the utilities aren’t switched over, we shut them off. You should do the same.
So what do you do if you have a situation where it’s physically impossible to have the tenant responsible for the utilities, which is frequently the case with duplexes and other multi-family properties that share a meter? Here are a few pointers:
- Any payments that the tenant has to make to you for utilities need to be referred to in the lease as “additional rent.” If they are a separate kind of charge, then some courts may not allow you to evict for non-payment of those bills or allow you to charge late fees for them.
- Always make sure to bill the tenant and notify them immediately after receiving the bill from the utility company. Don’t give the tenant an excuse for non-payment because you waited too long to bill them. It shouldn’t matter, but some courts may take sympathy on the tenant if they are getting late notice.
- Have the payment terms specifically listed in the lease. It should say something about how long the tenant has to pay after being notified, and it should say that an invoice from you is sufficient rather than requiring a copy of the utility bill itself.
- Take a utility deposit from the tenant at the beginning of the lease along with the normal security deposit. This should cover your best estimate of the total utility costs for a peak month of the year. This ensures that you have not only enough money to cover the rent if you have to evict them, but also the utility bills.
- Never do this unless it is physically impossible for the tenant to be responsible for the utility bills!
Give us a call and we can start taking care of all these headaches for you. Being a landlord is a lot more complicated than just taking rent checks. Let us do the hard part for you, and just watch the checks get deposited into your account.