Savvy landlords structure lease agreements to limit liability in the event of unpaid utility bills, but the water bill can be the trickiest utility of all.
This is because local municipalities may post a lien against your rental property for unpaid bills. So it’s important to review your process to make sure you can head off problems before they become public record. There is little federal guidance provided on this matter, although there can be specific state or local rules put forth by the municipality where the property is located. Here’s what you should know.
There are several different kinds of properties, ranging from single-family units to multi-family units, along with gray areas in between — such as room rentals or in-law apartments. The first point of clarification on who is responsible for the water bill depends on how utilities are metered at the property. Properties, where tenants share space on a single meter, must be paid by the responsible party (usually the landlord), and then billed to the tenant.
To avoid this situation, you can investigate whether it’s possible (based on current zoning restrictions) to install individual water meters at the property. This means that tenants can be billed directly from the municipality instead of the landlord, but you’ll need to monitor the accounts as any unpaid bills can be counted against the property.
This is typically untrue for other private utilities like electricity, phone, or cable, but government providers may be able to place liens, so check local and state guidelines.
A comprehensive rental agreement not only spells out the responsible parties, but also the consequences for unpaid bills. Since an unpaid water bill can significantly impact your property, it might be possible to spell out potential legal action taken against tenants who fail to keep their public utility account in good status; check with a lawyer for proper verbiage and procedures.
While it may not be legal to use the security deposit for unpaid water bills, you might be able to charge late fees or find some other reasonable and legal remedy. Just make sure any alternative is within the bounds of the law and well-documented. In addition to having a trusted legal advisor, using a service like https://www.turbotenant.com can put important resources like professional leasing and form templates at your fingertips.
Lease agreements and addendums which have been compiled and vetted by industry experts give you the best foundation for success when dealing with legal matters. This, alongside working with a local lawyer familiar with federal, state, and local landlord/tenant regulations can shore up the defense of your property investment.
Maintaining accurate, organized records is crucial, especially if you have shared metering set up and you are billing tenants directly for water services. Billed charges need to be fair, clear, and consistent; all payments need to be accurately recorded.
In shared meter situations, there needs to be a plan of action when one tenant appears to be using a significant amount of water in comparison to other tenants. This plan must be based on facts that can be gathered rather than accusations or hearsay.
Regardless of the billing and metering setup, an annual maintenance checkup that looks for and addresses any potential water leaks should be a crucial component of your rental business. Needlessly wasting money can cause tenants to become frustrated or impact your bottom line as well, so make sure faucets, toilets, and water lines remain in good working order, especially during cold weather.
There could be government or local charity programs in your area that can help beleaguered tenants unable to pay their bills due to a disability, loss of work, or other issues that may arise.
Although it isn’t your responsibility to research this, knowing if alternatives exist can help keep matters from worsening into legal challenges, and it could save you money and hassle in the long run.