Energy Bills

I wanted to know are electricity expenses normally a pass-through expense for a landlord? Or would this be an expense the property owner has to pay? I kinow that in many multifamily situations, the tenent chooses and pays his/her electricity. I would like to know what percentage of costs would electricity be for an owner.

Hi Victor,

I really have not seen many communities in which the landlord/owner would be responsible for any energy invoice aside from the house accounts (i.e. exterior lighting, office, amenities lighting, and common areas). However, in odd occasions, I have seen “special needs” or “executive” suites include all exclusive packages, in which they would charge a larger rental amount.

I have seen many different ways landlords/owners would calculate the resident portions, by either going by a specific formulas by tenant household size, or unit size or even bill averaged by property size. This is something you would really need to sit down and evaluate and see what best fit your community. However, I would recommend allowing the residents to pay for their own energy invoice.

Sincerely,
Pedro

It simply depends on the age of the property in most cases. In Texas you will see almost all properties (that have not been modified or retrofit with meters) that were built before 1970 that will have master meters for electric. Even if they have had sub meters installed there is still one master meter and one bill that gets paid by the owner.

Around 1970 you see the advent of the split HVAC system used in apartment developments here. With that came the addition of individual electric meters. How you bill it from that depends on your strategy. Depending on your local laws you can submeter, allocate by use/unit/occupants, etc. You can go All-bills-paid and include the electric in the rent.

Typically it comes down to the age of the property in reference to whether or not the property is master metered (to the owner) or individually metered (to the tenant directly).

I wanted to share some information about my communities in hopes that it would help. We have a two phase community where we have electricity "included" in the rent. For one phase, each apartment has a dedicated meter. In addition to the base rent, we add an additional flat rate of $75.00 to cover the cost of the electricity. These properties are in Phoenix, AZ so the summer really kills us on electricity bills, but we make up for it during the mild months. We just about break even for all of the costs. On the second phase, the apartments are not individually metered. Here, we have a bit more of a challenge. Currently, we do not have a flat rate charge for electricity added to the base rent, but we are considered it because of the $200K plus we are spending per year on electricity. I would have to agree with the previous post that it would be wise to check local laws in regards to billing back residents for electricity usage. I have heard that you can only bill back a certain percentage and then I have seen other properties bill it back in full. I hope this helps you!

It's tough enough billing people for water/sewer where they are metered. Then when you don't meter it becomes a matter of what is average consumption by resident. We start at a basic amount of consumption of water around 120 gallons/day/person. Then it incrementally less as you add more residents in the unit. You have to be very careful about laws in each state in consideration of billing residents. Especially for electric I would think that you could be viewed as a utility provider and that, from a legal perspective, could put an owner in jeopardy. While $75/month annually seems fair, you should review what the consumption is in each unit in Phase I where it's metered. Also, knowing how many people live in each unit will provide you with legitimate billing parameters such that if you were taken to task by local authorities due to resident complaints to the state you may have some ammunition to support this activity. For those in Phase I I believe it best to let them pay their own utility bills since it's metered. Further metering makes people observe conservation on using AC in the warmer months. One other point, look at those utility bills very carefully. Utilities are known for not billing properly, adding excess charges, transferring utility costs to another bill and on and on. Utilites have assigned you to the incorrect rate plan too.