The answer seems to be as elusive as another age-old question: Which came first… the chicken or the egg?
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. Including utilities as part of the rental price can make your property more attractive and convenient, as it takes the responsibility off the tenant. Best practices on which utilities (if any) to include in the rent price vary by location and property type, but it’s ultimately the decision of the property owner.
Whichever route you choose, everything should be clearly laid out in the lease agreement. Unless otherwise stated, the water (or water + sewage) bill falls under the utility umbrella, just like electricity or natural gas. If the lease states that the Tenant is responsible for all utilities associated with the Property, then the water bill is their responsibility. If the lease states that water is included in the monthly rent charge, then the water bill is clearly the responsibility of the landlord.
Sounds simple and straightforward, right?
What happens when a Tenant moves out and leaves an unpaid water bill?
Are you now required to cover these charges? This is where the water gets murky.
In many areas, water and sewage is owned by the city rather than a private utility company. In this situation, the city does have the power to put a lien on your property if the bill is left unpaid. A lien against your property isn’t a matter to brush off lightly. You could ultimately lose your property if you refuse to pay and the utility company pursues action against you in court.
In 2017, this argument took center stage at the city council in Hanford, California. The city proposed a resolution that would make property owners responsible for all unpaid water bills. At the time, the city had 192 delinquent accounts for a total of $35,987 in unpaid water bills. In the end, the resolution was rejected as the city agreed it would place an undue burden on the property owners.
Depending on your state’s laws, you could consider adding a clause to your lease that states the security deposit will not be returned until all utility bills are paid in full.
One of the best ways to avoid this issue altogether, is to take responsibility for the water bill at the Property level and factor the average cost per unit into the monthly rent charge. This way you are certain that the bill is being paid—and you won’t be left with any surprise charges. Rent Manager® helps make utility billing a seamless process with the Metered Utilities feature, which provides a customizable solution to track utilities all in one place, post utilities charges at once, and eliminate any questions about chickens and eggs.