RUBS or Higher Rent

I have an older complex (70's) that is not broken out with meters for each unit. Obviously the water is expensive and I would prefer to pass a portion of that expense on to the tenants. In the past I have had resistance from tenants paying for their own water / sewer. So what is the better way to try to get some of that money back? Raise rents or keep rents the same and implement a RUBS system over time as leases re new or have new move ins? Do tenants perceive it better when they see that lower rent number and have to pay the added on expense of the water as opposed to paying a higher gross rent?

Implementing a RUBS program would be the easier "sell" to your residents for a few reasons.

1. Raising rents in this competitive environment would hamper your ability to stay competitive with the communities in your area.
2. Communicating to your residents that utility costs are skyrocketing and in lieu of rental increases, a RUBS program will be put in place. Be sure to communicate to them that a portion of the utility expense is parsed out for a common area subsidy.
3. Most utility billing companies will be able to "massage" the resident's bills so that they are at a comfortable / tolerable monthly amount (just as long as they do not exceed your expense). That way you could help your residents budget based on the RUBS formula you implement.

The long and short of it is when residents see that your increase is tied to a direct expense instead of raising rents (which may be perceived as greedy) you should be better off.

Believe it or not, most residents EXPECT to have the responsibility for at least SOME their utilities. Let me ask for some more details on what you want to pass on to your residents.

What I have seen is:

Water/Sewer/Trash: Property receives a total usage bill, pays a portion off the top (usually 10-15%); then divides up the balance to the residents, based on the number of people in each household. Usually the Sewer and Trash are city mandated charges that cannot change; so the water usage is the biggest variable. The RUBS company should have a formula in place for this.

Electric: Resident responsibility; but if not individually metered, done as above.

Gas: most properties cook with electric, only heating water with gas or a combination of gas and solar. In this case, property pays. In properties that cook with gas, that cost is passed on to residents by paying a portion off the top, and dividing the balance equally among the households.

Communications (phone, web, tv): resident responsibility; however if you want to provide a satellite dish or 2 for each building to tap into (as opposed to having the potential for dozens); that would be your call to give the residents a choice and an amenity to market.

If you wanted to implement RUBS, I believe that you need to give your existing residents a 60 day notice of the change; but you can start it for all NEW residents immediately. What I would consider is starting off with a high property percentage (start with 60%), then gradually step it down to where you want to end up as follows:

Initial property share: 60%
End of 1st quarter property share: 45%
End of 2nd quarter property share: 30%
End of 3rd quarter property share: 15%


During that 1st quarter, I would strive to fix all leaks(including outdoor systems) and implement measures that would help preserve resources; like providing residents with the new CFL bulbs (there may be a rebate to claim from your local electric company to help pay for this) and installing new weatherstripping and/or window films that would help control costs. This is an opportunity to improve your 'green' image.


When choosing the company to do your RUBS, make sure you will be given the choice to have the residents pay RUBS to them, or to you along with your rent. I would choose to have the residents pay YOU, so that no resident would have utilities cut off without your knowledge. In this case, the RUBS company sends your residents a billing statement that tells them to add $xx to their rent, and is usually sent to arrive on or about the 25th of the month. Also, ask for a procedure for your staff to initiate transfer of utilities at move in/out via the internet.

Vacant Theft Recovery and a solid energy management program should also be considered. The financial impact on the property is significant, and there is little or no resident pushback that you would find with RUBs programs.

I have not heard of Vacant Theft Recovery.... can you elaborate???

(Moderator: Deleted)

There is lots to consider when thinking of implementing a program like RUBS. They can be very effective IF done right or they are just a pain for the property. Remember, the billing company you choose will get paid regardless - its up to you to make sure the program meets your needs and goals. First, check with State and Local governments to see what you can do legally. The decide what RUBS formula you are going to use - there are many and some are easier to manage (less reporting to billing company with things like resident counts). During your analysis determine your consumption. If the property's consumption is too high then the bills to the residents will also be "too high" and they will complain. Its better to fix consumption issues prior to so that the program is implemented sucessfully - you and your staff can "feel good" about the expenses your are passing on and that the expense reflects water/sewer at local rates and not any deferred maintenance. I also STRONGLY suggest that you automate your move in and out process with billing - numerous reasons for that and a seperate topic. DO NOT let the billing company do the collections. Its your money and you already have a monthly collection procedure with residents (rent). The billing company can bill but they do not collect well despite what they say - there is no incentive for them to do so. Make sure your lease/addendum is accurate to the program and make sure your staff understands so they can explain to residents.

Realistically, RUBS is very close to flat fees (where W&S is put in with the rent. Except there is no "illusion" that the residents bill is tied to the properties consumption - meaning residents no that no conservation efforts on their end will benefit them financially. However, flat fees can be substantially easier for a property to manage.

RUBs programs are not simple - they require effort and up keep. There are many areas where things can go wrong.

You can easily move RUBs percentages or Flat Fees up and down with the market.

Also, if you have heard or considered a vacant recovery program mentioned in these posts, i would start there first. The value of such program are very significant - again a whole other topic.

That is exactly why I would start a RUBS program with a HIGH community share. I would use that time to identify areas where consumption is high and try to resolve issues that contribute to that usage. I would also use the time frame between the announcement of the program to residents and it's actual implementation to improve issues that would lead to higher consumption:

-Change light bulbs in common areas and vacant units to CFL's (your utility company may offer a rebate that can finance this PLUS then you cut down on the types of bulbs you need to keep on hand as spare supply)
-Replace weather stripping in windows
-Install energy saving film on windows
-Replace plumbing fixtures with low flow alternatives
-Replace seals in plumbing fixtures not changed

These things you can implement right away in vacant units; but will need to have a plan to do occupied units soon after.


-Check landscape plumbing for leaks and malfunctioning sprinklers; replace/repair as needed.
-Check irrigation schedule so that watering does not occur when you have heavy rainfall and not at the time of day when you have the highest temperatures (usually the 2-5AM time frame is best) and that the irrigation is scheduled for 10-15 minute intervals. Don't let the water run for 40 minutes at 2PM when it is 100+ degrees.... It will evaporate before it does anything for your landscaping.
-When you do decide it is time to change landscaping, opt for plants/trees/grasses that can thrive without much water.

Let me first say that every property on which I have worked residents have been required to pay for, at least, water and (while paid with) it was not included in the 'rent' price. The residents knew they were paying a seperate fee regardless of if it was a flat fee or a RUBS system. From strictly my own personal experience, a flat rate is better from a resident relations perspective and the two are very similar from a cost reimbursement standpoint.

I understand the arguments from RUBS supporters that knowing their consumption could have an effect on their personal bill might lead some residents to practice more efficient usage...and that may be true in some instances, at least initially. However, more times than not when I have actually had a resident who was 'water conscious' they just ended up angry when they realized that they were (in their mind) 'penalized' for their neighbor's habit of showering three times a day under a RUBS system. So what, in the end, would usually happen is that those residents would choose to move somewhere else when their lease was up instead of renewing...because they felt like they were being billed unfairly. The same resident likely would never question the amount of their flat rate bill as being unfair because they use less water than their next door neighbor. (and believe me the residents who conserve water pay attention to every flush or drain sound that comes through the wall)

Aside from the potential to create the image in a residents mind that we are making them pay more than their 'fair share', having a flat rate causes the residents less confusion and less confusion means less opportunities for dissatisfied customers. There are two main types of confusion that I've freqently dealt with in connection with RUBS billing.

First is the expectation issue...what a new resident 'thinks' their bill will be versus what it actually ends up being. Since most RUBS billing takes into account several different factors (such as how many beds. baths, & occupants) there is usually a wide range of actual charge amounts and it's hard for a new resident to really know what to expect. Sure you can give them a range to expect...but people often will focus on that lower number of the range and set in their mind that's what their bill is going to be then when it's higher they are upset. If you always give them strictly the upper end of the 'usual' amount they may choose to go elsewhere and if they do still want to move in instead of running for the hills after thinking they could pay that every month then wouldn't you be better off if you just made that amount your flat rate?

The second confusion I see occuring frequently is the confusion that rent is paid in advance (as are flat rate utility charges) but in the case of RUBS billing it is in arrears. Therefore, at the time of move out residents (who have probably forgotten by then that they didn't have a bill their first month or two when they moved in) are often upset or confused as to why they still owe utilities since they paid utilities with their last months prorated rent. It can be difficult for them to understand that they were paying January's water bill with March's rent. This can result in someone moving out with a 'bad taste' in their mouth for your community who otherwise might have referred new residents to you.

These are strictly my personal observations from being on site and having used both methods...but I think flat rate amounts are a more resident-friendly way to charge residents for extra services.

This is been my experience with RUBS:

The property passes along Water, Sewer, and Trash costs to the resident under the RUBS program. The property pays a percentage of the total property bill OFF the top. The RUBS provider automatically defaults the CITY MANDATED sewer and trash charges to the households (the CITY says that sewer is $x and the trash is $y per month, per household); therefore the biggest variable is the water usage; and that has been done based on a per person basis (say the per person is $z, a 2 person household would be paying 2 x $z.). The resident's RUBS bill would represent the following amounts:

$x + $y + (##)$z = total bill; where the (##) represents the household size.

If the property IS using RUBS, the service provider often has a method in place for the site personnel to establish their billing online at the time of lease signing. This establishes the point in time where the resident's utility responsibility begins. Site staff also enters online the date the keys are received, establishing the end date of that responsibility.

I have been at properties, in the same neighborhoods that do RUBS, and properties that do not.... I have seen billing for both, and on average, the RUBS resident is actually paying less for the utilities covered. But this is a claim I would not specifically make to a prospective resident.

Resident is still responsible for the electric utility, the gas (if applicable); and the communications (web, phone, tv service). At the time of move in, the resident is required to provide the account numbers for the gas and electric.

I have also been at properties where the property pays 100% of the water, sewer, and trash; but these are hard to find in this economy.

I have a 1908 building and no individual meters. I have started to add $75.00 per month for utilities. I have had no complaints. These are studio apartments and we added it slowly starting when tenants moved in. We did not lower the rent. When you add a cost when they move in they are agreeing to pay. We have not had any problems and we have the added income.

Depending on jurisdictional rules, if the total of these "flat fees" exceed the amount that the property is billed for water by the water provider, you expose yourself to 1) being regulated as a public utility and 2) civil suits by residents. Water charges cannot be a profit center in the vast majority of states. You should vet it with local counsel at the very least.

Can that be a yearly total billing by the utility company or does it have to reflect the same billing sequence of the utitliy company? We use a flat rate on gas usage for boiler operated buildings. The flat rate allow residents to keep costs steady although the usage obviously fluctuates throughout the year.

I guess my question to you is this... what are other communities doing in your area? Is not paying for water a selling feature that might damage you for future rentals? In my area, there are very few communities that charge for water thus it would be difficult to offset this charge to my residents who could go down the street and have one less bill to pay monthly.
Our water bills here are pretty reasonable.. although, it would be nice not to have them at all, but we have implemented a water saver program that has helped with low flow toilets, low flow faucets etc. We upgrade during move outs or during renewals... We watch our bills and make sure there aren't any that peak higher than normal and if so then we do an inspection and check for leaks.

I think once you find out what others are doing in your market you will find the best solution.

It varies by jurisdiction. Some states compare on a yearly basis the amount billed by utility to property vs. amounts billed to residents (whether flat, RUBS, metered, etc.) Some do it monthly and yet others match the billing cycle (can be bi-monthly or quarterly). Need to be careful here. RUBS ensures that you don't exceed the total amount billed to property. An enterprising plaintiffs' attorney would be delighted to find out that the total of the flat fees exceeds the amount the property paid to the utility.

I have never seen RUBS billing done as a profit center, just as a way to make sure that all units have utilities turned on (the properties I have been on that have used it set it for Electric, Gas(if used at all), water, sewer, and trash). It allows the property to be 'in the loop' when a resident is delinquent on these bills, so that they can intervene and collect; without risking units being turned off (which would make units uninhabitable). The RUBS provider does most of the work; they provide a report to the property that includes total property usage (of which the property pays a percentage off the top for common area usage); and identifies the billing for each unit (usually based on # of people in the household for electric and water, sewer and trash are usually flat fees determined by the city regardless of household size). This method saves everybody time when moving in or out in setting up or closing accounts because on-site staff usually enters the resident information on a web portal of sorts when a resident comes in or leaves. It also saves all residents money, and encourages residents to be more active in reporting malfunctioning fixtures (mostly water fixtures) and replacing light bulbs with more efficient choices.

The RUBS provider does MOST of the work, property management only steps in when a resident moves in, out, or becomes delinquent.

I am a advocate for RUBS usage for these reasons:
1) A resident utility can never be turned off for non payment without management intervention.
2) RUBS identifies residents who are delinquent.
3) RUBS saves all residents time and money.
4) RUBS identifies opportunities to implement efforts to conserve resources; by alerting you when spikes occur or encouraging residents tell you there is a malfunctioning device that is wasting water or electricity.

If you ARE on RUBS and actually have residents who are delinquent on their payments, I have a letter I can share that has produced results in collecting past due amounts if you need it.

RUBS should not be a profit center, by definition. Flat fees can operate as a profit center, however. RUBS only allocates the total of the master metered bill (and usually there is a common area deduction taken off the top). However, some states take into account the billing fees added to RUBS bills when analyzing whether a "profit" is made. Some allow fees on top of the total of the master metered bill. What I'm getting at is that operating a RUBS program without regulatory compliance is a dangerous gamble. Flat fees are a gamble as well.

Mike wrote:

RUBS should not be a profit center, by definition. Flat fees can operate as a profit center, however. RUBS only allocates the total of the master metered bill (and usually there is a common area deduction taken off the top). However, some states take into account the billing fees added to RUBS bills when analyzing whether a "profit" is made. Some allow fees on top of the total of the master metered bill. What I'm getting at is that operating a RUBS program without regulatory compliance is a dangerous gamble. Flat fees are a gamble as well.

This is why you have a third party administer this for you. They will know how to comply with all the ins and outs of the concept.

True enough. Not all third parties have proper regualtory oversight, though. A short term revenue gain may be vastly outweighed by longer term liabilities.

Mike wrote:

True enough. Not all third parties have proper regualtory oversight, though. A short term revenue gain may be vastly outweighed by longer term liabilities.

That is why you need to thoroughly investigate the companies you consider for this and understand HOW they do WHAT they do..... As well as how to explain this to any resident/prospective resident who asks.....

Johnny -

You mentioned that you have a letter that you have used in the past to help with collections. Could you forward a copy to me at: [email protected] or post here?


Thanks

Hello Johnny do you think I can get a look at that letter.

What's your email??

I have a question. I just moved into an apartment complex (used to rent a home) Prior to moving in the manager told us that Utilities would be paid based on Rubs. We asked if we had to call the Gas Company or DWP and he said no because Utilities are based on Rubs (April) Now in (July) he comes and tell us that we haven't been paying our DWP bill and we need to pay the past due amount. We were confused. On our RUBS bill we see, electric, gas, sewer, trash and water. So based on that and what he had told us we assumed we were paying all of our bills through RUBS. He then tells us that RUBS is for outside lights, laundry facilities and common areas and that we are responsible for in unit usage and to switch the accounts to our name. I thought rent covered common area usage? We switched things over, but we are confused if they are allowed to charge us like this? Now we are paying two electric bills, two sewer charges two water bills on top of our rent. I feel we got lied to and misled. We will pay what we owe but are they allowed to do this?

Who regulates cost? I live in a residential complex that is using the system rubs and my bill used to be $65 a month now my bill is 154 160 almost three times amount not a flat fee