Archive for February, 2010

Utility Billing: Virtual sub metering of your building, has the time come?

Monday, February 22nd, 2010

Author: Scott Goodman • Scenic West Property Management

Bills, bills and more bills.  For those of you who have been paying attention and those of you who haven’t, a typical utility bill in the Los Angeles area has probably increased anywhere from 50% to 100% in the last five years.  Although most buildings have individual electric meters for each unit, they are master metered for water – in other words, they have a single water meter for the entire building. Since property owners cannot measure the water consumption of each individual unit, it is customary  that water is paid for by the landlord. 

It turns out there are several options being developed to transfer this cost from your pocket to that of your tenant.  The devil of course is in the details.  In short, there are a growing number of businesses that specialize in billing your tenants on your behalf a prorated share of your water bill. These proration formulas are beginning to show promise as more owners adopt them.  Most owners adopt these new terms at lease signing.  On your lease where you used to state that the owner pays the water bill you now state that it is the tenant’s responsibility to pay for a portion of your water bill.  

It sounds easy, but there are going to be some bumps along the way.  Is your building under rent control? Rent controlled buildings are best approached with a long term commitment in mind as you are likely to only implement these changes as vacancies occur. Another thing to consider: will you be able to charge as much rent if the prospective tenant has to pay a typical bill of,  let’s say, $40 per month?  Early adopters will face these challenges.  On the other hand, early adopters could reap the benefit of passing through a significant portion of their monthly water charges.  Food for thought.