Hello, greetings from Colorado Springs! My name is Lance Kohler, and I'm the managing broker and owner of the Cornerstone Real Estate Team.
Today, I'd like to talk about another landlord education topic: utility management for your rental property.
Should the landlord pay for utilities?
We often get asked this question. As a property manager working for investors who own investment properties, my general answer is no—you should not pay for utilities. Instead, you should bill those back to the tenants.
However, there are some considerations:
- Type of Property:
- Is it a single-family home or a multifamily rental?
- Are the utilities individually metered?
- Single-family homes are usually separately metered.
- Multifamily properties can be mixed.
- Utility Account Setup:
- Can the tenant set up an account directly with the utility company?
- In some cases (e.g., here in Colorado Springs), utility companies may refuse to put utilities in a tenant’s name, keeping them in the owner’s name.
- You may need to navigate this with the tenant or utility company.
- Payment Process:
- Are utilities paid directly to the utility company by the tenant?
- Or are utilities paid to you (the owner), and then you pay the utility company?
- In cases where utilities remain in the owner’s name, it’s recommended to have tenants pay you, ensuring timely payments and avoiding issues like liens.
- Liens on Property:
- Some utility companies (rarely, but it does happen here in Colorado Springs) may place a lien on the property if utilities are unpaid.
- You’ll want to monitor this carefully to prevent such situations.
Additional Considerations
- Lawn Care and Snow Removal:
- While not utilities, these responsibilities often come up in this context.
- Clearly state in your lease who is responsible for lawn care and snow removal—tenant or owner.
Single-Family Homes
- Utilities are most commonly separately metered.
- If utilities can’t or won’t be put in the tenant’s name, it’s recommended that tenants pay you directly, and you pay the utility company.
- This ensures utilities are always paid, protecting you from potential liens.
Multifamily Properties (e.g., Fourplex)
- Multifamily rentals often have a mix of utility setups:
- Individually Metered: Electricity.
- Common Meter: Gas, water, wastewater, and trash.
For house-metered utilities, you’ll need a method to allocate costs. In Colorado, there are two common methods:
- By Square Footage:
- A tenant in a 1,000-square-foot two-bedroom unit pays twice as much as one in a 500-square-foot one-bedroom unit.
- By Number of Occupants:
- Costs are divided based on how many people live in each unit.
Recommendation: Choose a method and apply it consistently across all your properties.
I hope this was helpful! Thanks for your time, and make it a great day!