A Landlord’s Guide to Tenant Utility Responsibility
Written by: Alan Nochumson
Whether you are new to property rental or a seasoned landlord, deciding whether you are going to be responsible for utilities, or have your tenant put them in their name, is a big decision for every property owner. The type of rental property, state landlord-tenant laws, and the rental lease agreement can all determine whether a landlord or tenant pays for utilities such as electric, gas, and water. To avoid misunderstandings between you and the tenant, it is important to put everything in writing by using a landlord-tenant utility agreement and being clear about responsibilities and timelines. Below we offer a guide for landlords in regard to tenant utility responsibility.
Guidelines for Utilities
In Philadelphia, utilities in a rental property usually consist of electricity, gas, and water. Deciding who pays for utilities can affect the total rent the tenant pays, the number of bills you as a landlord need to pay, and the profitability of your rental property. Including utilities in the rent could be a creative marketing strategy to attract great tenants. However, there is also a risk that the tenant could waste a lot of water or electricity since they’re not paying the utility services bill, which reduces the profit you make from the property. To minimize the risk of paying for utilities, a landlord can set a monthly cap on the utility expense. For example, the lease might state that if the total utility bill exceeds $150 per month, any overage will be billed to the tenant the following month as additional rent.
Below are 2 examples of things to consider when deciding if you or your tenant will be responsible for utilities:
- Listing Appeal: Including utilities in your rent can give you a competitive edge to find and keep the best possible tenants. Your rent will be higher than a landlord who doesn’t offer utilities, so be absolutely sure to stress the fact that utilities are included when you’re marketing your property for rent. Otherwise, prospective tenants will think that your home is overpriced.
- Convenience: The convenience to a tenant of renting a property that includes utilities can be very attractive. Many may be willing to pay a higher rent in exchange for the perk of you handling all of the bills. Plus, you’ll be saving your tenant from the extra time and trouble of setting up utility accounts and having to pay an additional deposit.
Paying of Unpaid Bills
Let us play a game of what-if to demonstrate the importance of having a clearly defined agreement when it comes to the tenant utility responsibility. If you were to have a tenant who, by agreement, was responsible for paying all of the utilities and they moved out without paying all of the bills, you could simply use their security deposit and assume you will never hear from them again. A common question is if the landlord is responsible for paying any overdue costs and fees. It obviously depends on the original agreement between landlord and tenant. As examples,
- If the utilities are in the tenant’s name: Chances are good that you cannot be held responsible for these fees. The utility companies have records showing that the tenant living on the property is responsible for paying the fees. This means that they are the ones who are legally bound to pay the company, and you are not. The utility company will be responsible for filing a lawsuit to get their money from the tenant if the tenant is unwilling to pay.
- If the utilities are in your name: This situation is less likely to occur because you would have firsthand knowledge about whether or not your tenant has paid. If the utilities for the property are in your name and the tenants were paying you directly for the utilities, you are likely going to be held responsible for the cost. The reason being is that your name is the one that the utility companies have, not your tenants. Even if your tenants were supposed to pay you and didn’t, the utility company does not care about that. You will have to pay off the fees as written by the company. If the tenant skipped out on you and left behind huge bills that you had to handle, you may want to consider taking them to small claims court to get some of that money back. Other than doing this, there is really no way for you to get this money back. You will simply have to pay for it.
- If the utilities are shared: If you are living in a situation where there is a shared metering system between multiple tenants or between you and your tenants, figuring out what to do with unpaid utility bills gets a lot more complicated. The basic fact is the person with the name on the contract with the utility company is responsible for ensuring that the bill gets paid. If someone else has signed an agreement to pay some portion of that money to the contracted person, any dispute about that payment must be handled in small claims court.
When it comes to tenant utility responsibility it is imperative to be as comprehensive and thorough as possible. And to be sure it is all in writing and communicated directly to your tenants. A landlord has a lot on their plates at all times and being comprehensive in terms of the payment of utilities can go a long way to ensuring fewer headaches down the road.
At Nochumson P.C., we are more than legal counsel. We are people serving our neighbors and community in Pennsylvania and New Jersey. Knowing that real communication between real people can help lead to real positive results, our team of attorneys are available 24/7 to help answer your legal questions and to fight for you with skill and fortitude, whatever the case may be. When you hire us, you can expect a sensible and cost-effective approach to legal counsel. We think fast, think ahead, and get things done. Contact us today or call us at (215) 399-1346 to see how we can represent you.