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4 Steps to Start Recouping Utility Costs from Residents

If you attended the NMHC OpTech Conference in Dallas this week, hopefully you got to catch our very own Ben Truehart lead the session, “Utility Cost Recoup & Reduction Programs.” If you couldn’t attend, but are thinking of stepping away from a “utilities included” model, here are four steps to get things rolling.

Understand Local Rules & Regulations

This can be tricky because there are no federal or universal laws regarding utility bill-back. Every state has its own rules and regulations, as does each municipality. Failure to comply with the stated regulations can lead to heavy fines and penalties.

Becoming a member of an organization like the Utility Management and Conservation Association (UMCA) can be tremendously beneficial when trying to understand regulations in your state. Members of the UMCA have access to an up-to-date database of rules and regulations for each individual state. Third-party billing providers who are also members of the UMCA will make sure you are continuously in compliance with these regulations.

Decide Between Submeters or RUBS

Next, property owners need to decide on the infrastructure that will measure your residents’ utility usage. Will you install submeters, which track the precise utilities used in each unit? Or will you utilize your property’s existing master meter and calculate usage via RUBS? RUBS stands for Ratio Utility Billing System, and works by utilizing formulas to allocate usage. The formulas are based on factors such as square footage and number of occupants in each unit. The meter usage will then be divided among residents according to these established formulas.

There are a lot of pros and cons for both submeters and RUBS, which PayLease’s team will be happy to talk through with any property management company.

Build Internal Processes or Select a 3rd Party Billing Provider

Once you decide if you will be using submeters or a RUBS, you need to determine the logistics behind billing residents for their utility usage. Perhaps you have plenty of in-house resources at your disposal. If so, you will need to assign someone to the following tasks:

  • Manage meter installations (if necessary)
  • Perform readings of the meters
  • Calculate monthly charges
  • Prepare and deliver resident bills

Most property management companies do not have the resources to effectively perform these processes and opt to outsource them to a third party. Third-party billing providers have expertise in all of these areas and will manage all of these things for you. They will even integrate utility and payment data into your property management software.  For tips on interviewing third-party billing providers, click here.

Update Lease Agreements

Lease disclosure about how you will bill residents for utilities should be considered a universal requirement. It’s an industry best practice and a smart way to avoid resident confusion.

All billing methods and fees must be fully disclosed and explained in the lease. Any changes to the lease agreement (pertaining to utility charges) should be signed in an addendum or pursuant to the original lease language. Residents must also have sufficient written notice in accordance with the lease when changing billing methods or fees and detail all the changes and fees in the notice.

If any of these seem like daunting tasks, contact PayLease for guidance. We’re happy to put together a personalized action plan for your company so you can effectively recoup utility expenses.

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