Landlord's Learning Center- Who Pays What Utilities? Keeping up With Current Rental Trends

By
Property Manager with Investors Choice Property Management CAL BRE LIC# 01124954

Ok, you've found a good tenant with the credit, income and history requirements all met. Now its time to sit down and enter into a lease agreement. As Sacramento area property managers, a common question we get from both tenants and landlords is regarding the utilities. Who pays for what?

In the greater Sacramento area, is it customary for tenants to pay for gas electricity and phone. However, most landlords pay for the water, sewer and garbage. This custom can very from county to county. In some areas, utility companies for water will acknowledge a tenant as a responsible party, but most utility companies for water, sewer and garbage will only recognize the owner of the property. Even if a tenant signs a lease stating that they will pay these costs, if there ever arose a problem concerning non-payment of a utility bill, the owner could face a lien against his/her property.

At ICPM, we recommend getting to know the local trends in your rental area. Use free resources at your disposal to find out what your competitors are charging on their rental units. Craigslist can be a great tool for landlords to stay in the loop on current market rents, etc.

It also helps to know if your rental property has or will soon have metered water. If your water is metered, you can at least protect yourself by having the lease contain a water "cap", stating that owner will pay for water up to a certain monthly amount, but that any amount exceeding this cap would require the tenant to reimburse the landlord for the difference.

A final note on utilities- Disclosure is key. Nothing sours an initial tenancy quite like sitting down to sign paperwork and finding out for the first time that there will be extra charges for water, sewer and/or garbage due. Any additional charges or deposits due (utilities, additional deposits for keys, animals, etc.) should be clearly outlined in advance of accepting any good faith funds from the tenant. This is an area where quality property management can help, as we are accustomed to negotiating contracts on a daily basis.

Having all parties understand what is expected up front will go a long way towards insuring a solid foundation to what will hopefully be a long term quality landlord/tenant relationship.

Investors Choice Property Management (ICPM) manages 100 single-family units with the care and diligence our Landlord clients deserve, in a manner that has them referring their friends, co-workers and family members. With over 16 years professional property management experience, our business is 95% word-of-mouth referral, we do NO Sales, and pay among the highest referral fees in the industry for management accounts. Visit our website at www.investorschoicepm.com today for more details, and find out what we mean when we say:

“Experience Property Management the Way it Should Be.”

Comments (8)

Robert Machado
Homepointe - Sacramento, CA

We have the same recurring issues--who pays what utility and what happens if the responsible party does not pay.  It certainly varies community to community.  My rule of thumb is to ask our owner clients how much time and effort they want to exert to save a buck.  I try to sell a healthy rent for the rental that absorbs the utility expenses.  If the tenant is made responsible and they do not pay--the owner is burdened with the late fees and potential tax lien.  These fees cannot be collected in Unlawful detainer court--the owner must take the additional step to take the tenant to small claims and hope for a speedy resolution.  Lots of time and energy is wasted at small claims court....pay those utilities and make it a business expense!

James Safonov

Nov 13, 2008 09:19 AM
Gena Riede
Riede Real Estate, Lic. 01310792 - Sacramento, CA
Real Estate Broker - Sacramento CA Real Estate (916) 417-2699

Thomas, as a landlord I would love to be able to charge for utilities such as water but you certainly gave me an excellent idea about charging for overage.

What counties do landlords actually charge for the utilities? I'd be curious to know.

Nov 15, 2008 03:31 AM
Thomas R. Martin Broker/Owner ICPM
Investors Choice Property Management - Sacramento, CA
Property Management the way it SHOULD be.

Gena,

Most of Sacramento has Landlords paying water, sewer and garbage. El Dorado County has many tenants paying these extra utilities, while Placer is mixed. In Roseville, while it is not commonplace, more and more tenants are being asked to pay the water. Likewise, we are seeing this in Elk Grove.

 

The "water-cap" provision is always a good idea, even in areas of flat rate service, just in case they make the switch to metered during the course of a lease.  Thank you for your comments.

Nov 15, 2008 03:54 AM
Gena Riede
Riede Real Estate, Lic. 01310792 - Sacramento, CA
Real Estate Broker - Sacramento CA Real Estate (916) 417-2699

Thomas, thank you for getting back and addressing my question. Where do you recommend I get information to help determine a water cap?  Any suggestions?

Nov 16, 2008 02:50 AM
Thomas R. Martin Broker/Owner ICPM
Investors Choice Property Management - Sacramento, CA
Property Management the way it SHOULD be.

Gena,

Our best resource has always been the Landlord, the leas tperson to pay a water bill. We have not had much luck getting the info out of the utility company. We have about 100 units we manage around Sacramento, and have found the water rates do not very greatly. a standard 3bd home in Citrus Heights runs around $80 every other month, while our 3750sf 5bd in Elk Grove is running $125 every other month.

 

Our standard caps for 2Bd- $40/month, 3Bd- $50/month, 4-5Bd+- $60-$65/month. Bear in mind, our focus is not to get the tenants to pay water, but rather to be mindful of wasting water. It also prevents the issue of the tenant failing to report they ran over a sprinkler head because they did not want to pay for a new one.

Nov 16, 2008 04:35 AM
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management

Your cap is an interesting idea.  I wonder about the practicality and who is watching the various caps.  It may run into a lot of work with the tracking and billing.

We have another approach we offer.  We pay the bill for our clients and at the end of the month send a copy of the paid bill to the tenant.  The tenant ledger is billed for the amount of the bill and the tenant is required to pay with their rent.  This way the bill gets paid and the  owner gets reimbursed.  I do agree that the tenant must know during the marketing process who pays what.

Dec 05, 2008 02:32 PM
Donald Stevens
MyInsuranceNerd.com - Los Angeles, CA
Insurance for Landlords and Real Estate Closings

Charging enough rent to cover costs is always a great idea. It seems to me the landlord would be better served paying the utilities and then bill the customer directly or charge enough rent to cover the cost. The reason is the maintenance of the home is partially kept in tact by keeping the utilities on. Cold weather areas risk burst pipes and tenants may resort to alternative methods of lighting or heating the home that could be dangerous for the tenant and the property.

The Home Insurance Specialists

www.getgliga.com

Great Lakes Insurance Group Agency

Dec 13, 2009 03:17 AM
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • GRI • HAFA • PSC Calabasas CA

Landlord usually pays for HOA if any, sometimes a gardener and a pooler if it is SFR. 

Nov 27, 2016 07:44 PM