by Janet Portman
Q: We’re new landlords, proud owners of a 20-unit apartment building. A neighboring owner advised us to consider billing our tenants for their water usage. We’ve never heard of this; how can we bill them when there’s only one meter that services the building? –Martha and John M.
A: Making tenants pay for their water usage has become a popular way for landlords to recoup their water costs and increase their profits (studies have also shown that when tenants are billed directly, a property’s overall water usage drops considerably). There are three ways to go about this.
The best method is to have the water company install meters for each unit, so that each household pays the utility directly.
Secondly, you can contract with a sub-metering company to install sub-meters, which transmit a unit’s water usage directly to the company via digital signals (no need for a meter-reader to physically check the meter). The company bills each household directly, and the landlord pays an administrative fee.
Finally, you can estimate each unit’s usage by using the “RUBS” method (Ratio Utility Billing System), in which you estimate each unit’s usage and share of the total bill based on the unit’s square footage or number of occupants. The landlord bills each household for its share of the monthly bill.
Each of these approaches has its limitations, however. Having the water company install individual meters is feasible in new construction, but usually not practical as a retrofit. Using a sub-metering company involves an initial expense (installing the sub-meters), though you may find an aggressive company willing to front the cost. And don’t count on being able to pass-through this cost (or the ongoing administrative costs) to your tenants, because some states or localities forbid it. As for RUBS, many tenants will object, arguing that whatever formula you use cannot take into account individuals’ habits (the careful family of three might use less water than the wasteful couple next-door, for example).
Be sure to do your homework before taking up your neighbor’s suggestion. Your state might disallow sub-metering altogether (as does Mississippi), and your local laws might have something to say, too. Start by talking with your water company or check its Web site (go to www.utilityconnection.com for a comprehensive list of water districts and agencies). If you decide to use a sub-metering company, shop around and look for a company with a solid reputation for customer service and accurate billing.
Janet Portman is an attorney and managing editor at Nolo. She specializes in landlord/tenant law and is co-author of “Every Landlord’s Legal Guide” and “Every Tenant’s Legal Guide.” She can be reached at firstname.lastname@example.org.
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