There is a local and national trend, which is gaining momentum that may be of interest to apartment owners and managers having to do with rising utility costs. You may know that utility costs have increased dramatically over the last year or two (20% or so in the Northwest), yet rents have not increased proportionately. The result of course has been negatively reflected in the owner’s N.O.I. (that all important bottom line).
Therefore, there is currently a trend (that actually began in the mid 1990’s among the larger operators) of passing water/sewer charges through to tenants. The two most common methods employed are:
- Sub metering each apartment unit, which by the way is impractical for the smaller operators.
- Ratio Utility Billing System (R.U.B.S.) basically prorating the expense of the total utility overhead and passing on that expense to the tenant via a monthly charge-back.
According to my sources*, approximately 10 – 20% of the estimated 27-million apartments in the U.S. have already been penetrated for either sub metering or some kind of R.U.B.S.
Please keep in mind that my objective in addressing this issue is not so much to convince anyone to implement this practice, but rather to make owners aware of the trend. This could be one way, now or in the future, to keep pace with rising utility costs without significant rent increases for tenants.
If and when an owner decides to go ahead with some kind of charge-back system, I would recommend that the arrangement be made in advance of move-in, or upon renewal of any lease. The owner’s right to charge for water would then be written into the lease agreement and the tenant would be given the chance to accept or reject the new terms of the lease.
Until next time,
Glenn Sather, The Apartment Broker
*Multi-Housing News, May 2001
