By: Laurie Mega
Paying utility bills can be tricky for everyone involved: property owners, tenants, and property managers. Handling utility payments yourself can take up precious time billing tenants, collecting payments, tracking down missing payments, and getting money out to utility companies.
If tenants pay their own utilities, you may not have to worry about tracking the money, but there’s still some risk to your owners if residents miss payments.
But you can help your tenants, your owners, and your own business by putting together a process for handling utilities in a way that’s efficient and repeatable.
Understand How to Handle Utilities
Before you decide how to handle utilities, it’s important to understand the different payment situations an owner might set up.
Utilities Included in the Rent
Including utilities, such as water, in the rent can be attractive to prospective tenants because it takes the guesswork out of monthly payments. Tenants will be able to count on one rent payment to you every month and know that utilities are covered, too.
The trick is to raise the rent enough to cover utilities every month without overcharging your residents. On the flip side, if you get a tenant who cranks up the heat or uses a lot of electricity, you could end up paying more than you budgeted for.
There is also a risk of over-pricing properties when including utilities and losing good prospects who may not be aware that your rent includes utilities. Your lease language should spell out exactly which utilities are covered in the rent and how much of the rent goes toward paying them.
Some owners charge a base fee for all utilities and then handle all the bills themselves. Fees have to follow local and state laws, which could get you into a situation where you’re not charging enough to cover utilities.
If you choose to charge a fee, your lease should explain exactly how much that fee is and what it covers.
Utilities Paid by the Tenant
Letting tenants handle the utilities can help you keep rents competitive, which is also attractive to tenants. It also frees up your staff from having to deal with utility bills, calculating costs, and keeping all payments up to date.
But there is a risk with this option, too. If a tenant moves out without paying a bill, the responsibility could fall to the owner. If the unpaid bill is for water or sewage — something controlled by the city — a lien could be placed on the owner’s property.
This setup can also delay the tenant from moving in because they will need, on average, two days to transition utilities into their name before moving in, creating a longer vacancy period.
Taking the Guesswork Out of Utility Payments
Before COVID-19, many aspects of property management were already heading online. The push for more mobility coupled with the of the millennial and Gen Z generations drove the demand for online property management software, such as Propertyware, which puts everything from payments to document signing and storage to work order tracking onto one portal. That demand has only increased with the need for social distancing and contact-free transactions.
Paying utilities is much the same. Utility companies usually provide their own portals for payment, billing history, and usage tracking. But that still means logging into several portals to cover gas, electric, sewage, water, and other utilities.
You could always try to keep track of every utility payment yourself, but the best approach is to use a utility management platform to simplify the process completely.
Using a Utility Management Platform
A good utility management service, such as the one provided by SimpleBills, will act as a third party, collecting all utility bills from providers and invoicing the tenants directly. This service effectively takes utilities off of the property manager’s plate and allows them to focus on more revenue-generating operations like lease-up and renewals.
For managers or owners who already bill utilities back to their tenants, a utility management service should be able to manage this for you, reducing the time your staff spends on it.
The service should also keep track of issues like missing bills or spikes in utility costs.
Tenants have access to all their utility usage in one place, allowing them to pay and track their utilities month to month.
It can even apportion bills between tenant and owner.
Finally, a good utility payment service will allow you to turn over units without turning utilities on and off, saving both you and your tenants time and money.
Owners and prospective owners may need your help choosing the right option for utility payments and setting up a process. By showing them their options and having a process already in place, you provide value to them and to your tenants.