Welcome!

By registering with us, you'll be able to discuss, share and private message with other members of our community.

SignUp Now!

Utilities and rentals...

B

BlaineBradley

0
Registered
Joined
Oct 19, 2013
Messages
51
Is it better to have the major utilities (heat, power and water) in your name and charge a higher rent including utilities or have your renter get the utilities in their name?

The way I see it...

Pros in your name

1. Easier transition as tenants change
2. No re-connection fees when unit is vacant

Cons in your name

1. Tenants having no regard for their usage and running up bills

Pros in their name

1. Lower advertised rent rates
2. Tenants being conscience of their usage since they are paying the bills

Cons in their name

1. Re-connection fees

What are your thoughts? Am I missing something?
 
There are in my opinion no Pros in favor of having hydro in the landlord`s name. Tenants that do not directly pay for utilities are wasteful and in the event the relationship turns bad between tenant and landlord expect the tenant to open all the windows in the winter and heat the house with the oven, turn the furnace up to max and run the water non stop.

Having experienced bad tenants I would never purchase a rental property that did not have separate utilities and I would always insist utilities be in the tenants name before I hand over the keys.

Tenants can of course skip out on paying for their utilities but that is why we screen to insure applicants are long term employees and rely on small claims court when they don't pay.
 
I agree with above although I also have had some pretty substantial success with including utilities and upping the price. Example: utilities cost $220-$250/ month, round it up to $300 and include it.



Important to note though that you lose the utility company as a screening tool (ex: they owe $500 and can't get water hooked up) with this strategy. I see value in both approaches. Property specific perhaps.
 
One thing that you are missing is that you never include the utilities with the rent in Alberta - instead you have a "Utilities Agreement" as an addendum to the lease and charge an agreed amount that is "subject to adjustment" and is due along with the rent (so late payment of utilities also constitutes a breach of the lease).



So the advertised rent is the same as if utilities were in the tenants' names. In my ads, I state that "utilities are extra but we would be happy to arrange a utilities-included rent." Works great. And most tenants appreciate the convenience.



Also, if the utility costs rise, you can adjust the monthly amount owing (providing your utility agreement allows for that). (I usually inform the tenant of the issue and make suggestions as to how they can reduce the bills, otherwise their payment will be increased.)



Another pro is that you get the utility payment in advance and you know that it has been paid. If the utility is in the tenant's name, you won't find out until after they move if they have paid their final bill, and if they don't pay the bill gets charged to the homeowner.
 
Excellent advise there. Anything directly on your lease is subject to RTA for your area. Anything off isn't.
 
Just as a side note in regards to Ontario RTA. If you rent inclusive you are protected by the RTA (not really as the board usually rules against landlords) but the tenant must still be in posession of the unit.

If the utilities are in the tenants name and they don't pay or in the landlords name (tenant reimburses landlord) the landlord is not protected under the RTA. You will be required to go to small claims court to collect in both situations.



Small claims court is actually a plus as the LTB rarely rules in favour of landlords as they do not respect contract law where as small claims court does obviously respect contract law and will order the tenant wages be garnished. Small claims court is the preferred method to collect even if you do have to start with the LTB.
 
[quote user=Sherilynn]...

Another pro is that you get the utility payment in advance and you know that it has been paid. If the utility is in the tenant's name, you won't find out until after they move if they have paid their final bill, and if they don't pay the bill gets charged to the homeowner.




If you collect utilities in advance, alongside with the rent, then how do you pay their utility companies?



Ex. if you collect 250 extra at the beginning of the month, then would you just pay 250 into the EPCOR and Enmaxx(Edmonton) account online each month?



Kir.
 
[quote user=invst4profit]Just as a side note in regards to Ontario RTA.
So far so good in Alberta. Since the Utilities Agreement is an addendum to the lease, the RTDRS has enforced the utilities as rent owing for our cases.



If we didn't have the agreement as an addendum to the lease, and we were just collecting based on the utility bills, then it wouldn't fly at the RTDRS.
 
[quote user=kir]If you collect utilities in advance, alongside with the rent, then how do you pay their utility companies?



Ex. if you collect 250 extra at the beginning of the month, then would you just pay 250 into the EPCOR and Enmaxx(Edmonton) account online each month?


The utilities are all in my name, and are paid automatically from my bank account.



I take last year's total bills and divide by 12. Then I bump that number up a bit to account for higher usage and/or higher prices. Then I split the number between the suites based on number of people and/or number of bedrooms. (I never discuss or promise a percentage split because the RTDRS will hold you to that even if the second suite is vacant.)



It could be $250 for utilities received from Tenant X on November 1st, and later that month the Epcor bill may be $135 and the Gas bill may be $39. In winter the excess decreases and in summer the excess increases.



When the tenant leaves, if he has been a good tenant, doesn't owe me money, and has a utility surplus, I will refund a good chunk of it. If he owes me money, then the utility surplus offsets it, potentially saving me a day in court.



I know that some investors use utilities as an additional source of cashflow, but if the tenant isn't aware of the markup and signs the agreement thinking that the money is only covering their actual expenses, then that just doesn't feel right to me.
 
"I take last year's total bills and divide by 12. ..."





How about if you don't have 12 months history of the place because it is a new purchse? In Calgry Enmax is not willing to disclose the priviouse owner's info. The other question is how do you set this up with the provider? Do you set a fix bill rate with them?





Thanks in advance!
 
If you have a similar property, you can use those numbers as a base. But be advised numbers can change dramatically depending on water usage (low-usage fixtures and appliances), insulation R-value, and window age/quality.



You could make it a term of your purchase contract that you are able to review the bills from the previous 12 months (but I have never done this).



I don't set a fixed bill with the suppliers because then it would be a bookkeeping nightmare to track actual usage. The provider's fixed bill would be based on the previous 12 months (so potentially a different tenant), and the numbers could be very different this year.
 
Another pro for including utilities (when you have no other choice - eg. 1 meter) is that when I go to the bank and they ask me rental amounts on a property, i tell them the full amount including my utlitilies. In my case it is a $700 per month difference on the rent. With banks tightening their stance on how much income they recognize for future financing, then it might help to have more properties with utilities included. It is not optimal, for reasons already stated, but I have a couple of houses where I have to include heat and light, and my income (as far as the lender is concerned) is significantly higher.
 
Another pro for including utilities (when you have no other choice - eg. 1 meter) is that when I go to the bank and they ask me rental amounts on a property, i tell them the full amount including my utlitilies. In my case it is a $700 per month difference on the rent. With banks tightening their stance on how much income they recognize for future financing, then it might help to have more properties with utilities included. It is not optimal, for reasons already stated, but I have a couple of houses where I have to include heat and light, and my income (as far as the lender is concerned) is significantly higher.
 
[quote user=nubiwan]Another pro for including utilities (when you have no other choice - eg. 1 meter) is that when I go to the bank and they ask me rental amounts on a property, i tell them the full amount including my utlitilies.


This only works if the utilities are included in the rental amount on the lease. As mentioned previously, I prefer to have the utilities as an addendum so that I have more flexibility.
 
You must log in or register to reply here.
Back
Top Bottom