Utility Billing: 6 Things Property Managers Need to Know
If you’re a multifamily or HOA property manager, billing your residents or homeowners for their utility use has likely crossed your mind. Many properties have already started an apartment utility management program. The prevalence of this practice has grown as utility rates and fees continue to rise, impacting a property’s cash flow and bottom line. Whether you’re billing already or interested in starting a utility billing program, here are some important considerations to keep in mind:
1. Pick the Right Calculation Methodology
Choosing the right pricing methodology is one of the first and most important decisions you need to make when undergoing or updating your utility billing program. A flat fee for all residents would seem like the simple, safe choice, but it requires a lot of guesswork to figure out what that fee should be. Go too low and you’re leaving money on the table. Go too high and you may “profit” from utilities, which in some jurisdictions legally classifies you as a utility, creating legal and regulatory headaches. Another downside of the flat fee model is that it encourages overuse by residents due to the “all you can eat” model. As an alternative, Ratio Utility Billing Systems (RUBS) allocate utilities based on certain factors such as unit size, and are an attractive option as long as you live in an area where this is allowed. Finally, submeters are a great option for usage-based billing. If you’re using submeters, different rates may be charged based on your jurisdiction, which you’ll want to understand as they will impact your recovery.
2. Update Your Lease Language
As the contract between the owner and the resident, your lease is required to adequately disclose the existence of your billing program and any associated fees. Your jurisdiction will likely have specific legal and regulatory requirements you must meet.
3. Communicate With Your Residents Clearly
In addition to including utility billing program details in your lease, your bills and statements must be itemized, clear, and comprehensive. There may be legal and regulatory requirements here as well. Not reflecting a specific line item properly on your resident bill can expose you to risk.
4. Keep Up with Changing and Re-interpreted Regulations
You may feel comfortable that you understand the regulations in your area today; However, when regulatory agencies turnover, laws may be changed or re-interpreted. When running a utility billing program you must keep tabs on and follow new rules. As changes arise, these may also require more/different resident notifications and lease language.
5. Understand and Abide by Conservation Benchmarking Mandates
Some jurisdictions require multifamily owners to report their utility consumption data with the EPA Energy Star Tool. According to the website “ENERGY STAR Portfolio Manager® is an online tool you can use to measure and track energy and water consumption, as well as greenhouse gas emissions.” This tools can be used to benchmark the performance of one building or a whole portfolio of buildings, and manage energy and water use.
6. Maximize Your Cost Recovery by Capturing All Ancillary Costs
Don’t leave money on the table. Capture your source documents throughout the year and analyze your different ancillary costs such as water and sewer bills from taxes and other sources to see what you may be able to bill back. Done correctly, this can result in increasing your recovery and reducing your tax burden.
The utility billing regulatory environment is dynamic and complex. Whether you’ve kicked this process off already, or are just thinking of getting started, working with a partner who offers expertise is important. They help you take the guesswork out of the equation, so you maximize your returns while minimizing risk. If you have any questions or need some advice, feel free to contact our Resident Billing experts at Zego at any time. As always, we’d be happy to talk with you.