Best Practices for Fairly Billing Tenants for Utilities
Billing tenants individual tenants for their actual utility usage and other associated costs within a leased property, sometimes called utility sub-billing, requires a property owner to measure and calculate each tenant’s utility usage.
It involves accurately measuring each tenant's consumption of utilities, like electricity, water, and gas, and then fairly invoicing tenants based on their actual usage. Proper tenant billing ensures transparency and fairness in the management of a shared living or commercial space.
In this article, we’ll talk about the best practices and technology solutions for fair tenant utility sub-billing.
Why Is Fair Billing Important?
In buildings that do not have utility meters for each apartment unit, tenants can still be billed for utilities using the RUBS (Ratio Utility Billing System) method. The key distinction with RUBS is that tenants are billed proportionally based on factors such as apartment square footage, regardless of their actual utility usage. Tenants often view RUBS as unfair for several reasons.
First, because RUBS allocates utility costs based on factors like occupancy or square footage rather than actual usage, some tenants invariably end up paying more than they use. Second, RUBS lacks accuracy and transparency, potentially burdening certain tenants unfairly.
Additionally, RUBS doesn't provide any incentive for tenants to conserve resources since they're not directly responsible for their individual consumption. This can result in excessive usage by some tenants, leading to higher bills for everyone.
Ultimately, RUBS can create tension and dissatisfaction among tenants who feel they're being unfairly charged for utilities.
Recognizing the unfairness of RUBS, some cities have banned the use of RUBS entirely. For example, the City of Santa Monica, CA, recently outlawed RUBS as a billing method.
Fair tenant billing is important for several reasons:
Improved Tenant Satisfaction
Tenant billing based on actual usage promotes fairness. It allows tenants to control and manage their costs. Proper tenant billing creates a positive living experience and strengthens the property owner-tenant relationship.
Financial Benefits for Property Owners
Accurate tenant billing guarantees that property owners recover all associated expenses and improve property profitability. Tenant billing also provides data to optimize resource usage and find cost-saving opportunities.
Environmental Impact
Tenant billing incentivizes conservation, as tenants are motivated to reduce their utility consumption. This supports sustainability efforts and minimizes the property's environmental footprint. Billing tenants for their actual usage can reduce a building's utility consumption by 5-10% or more.
Legal and Compliance Advantages
Proper tenant billing aligns with regulations, mitigates legal risks, and demonstrates responsible management practices. It also boosts the property owner’s credibility and trustworthiness.
Best Practices for Tenant Billing
Here are some of the best practices for fair tenant billing:
Accurate Metering
Reliable and precise metering systems are important for fair tenant billing. They make sure that each tenant's consumption is measured accurately and transparently.
Transparent Billing Statements
Providing tenants with clear, itemized billing statements empowers them to verify charges and understand their individual usage patterns.
Regular Audits and Compliance
Conducting periodic audits is important to validate the accuracy of tenant billing. Additionally, adhering to all relevant local regulations and standards demonstrates the property owner’s commitment to responsible management practices.
Technological Integration
Using specialized submetering systems enhances the efficiency and accuracy of the tenant billing process. This system streamlines billing management, provides data-driven insights, and supports sustainable resource usage.
Submetering for Tenant Billing
If you want to improve tenant billing on your properties, having a submetering system can come in handy, as it can reduce tenant bills and monthly invoices.
What is Submetering?
This system measures utility usage for each apartment unit within a building. So, instead of allocating utility costs regardless of actual consumption levels, property owners can bill tenants accurately based on how much energy or water they've used.
For water in particular, traditional water submeters are incompatible with most apartment buildings because the plumbing layout does not have a water main going to each apartment.
In these cases, owners can instead install reliable micrometers on each fixture in each unit and use the latest IoT cloud technology to calculate each unit’s individual consumption for monthly billing.
Applications of Submetering
Toilets: A micrometer allows for precise measurement of water usage per flush, which helps in finding leaks or inefficiencies and ensures that tenants are billed accurately for their specific consumption.
Kitchen sinks: Installing micrometers on kitchen sinks helps track water usage related to cooking and cleaning and gives different tenants insight into their consumption patterns and the opportunity to manage their water use more effectively.
Faucets: metering faucets usage in bathrooms, kitchens, or utility areas provides detailed data on water usage, which can be important for detecting excess usage or leaks.
Showers: Installing a micrometer on each shower is important for tenant billing and can also be used to detect illegal high-flow showerheads.
Any water fixture: By applying submetering to all water fixtures, including different meters for each unit, those in public or communal areas, property owners can monitor water usage throughout the property and check the accurate and equitable distribution of water costs among all users.
Submetering Case Study from DrizzleX
Here’s a successful water submetering implementation that enabled tenant billing:
The submetering system implemented by DrizzleX at this property resulted in significant changes in water usage and cost savings, which directly affects tenant billing.
Here’s a breakdown:
Reduction in Average Daily Gallons per Unit
Before DrizzleX, the average daily gallons used at the property was 2,363 gallons, with spikes exceeding 4,000 gallons per day. After installing DrizzleX, the average daily gallons dropped to an average of 1,268 gallons per day.
Cost Savings and Gallons Saved
The installation resulted in a yearly dollar savings of $10,860. Water use was reduced by 55%. The property saved a total of 592,960 gallons in a year, thanks to DrizzleX.
From a tenant billing perspective
When it comes to tenant billing, here’s what happened:
Lower Consumption, Lower Bills
With the installation of the DrizzleX system, the water usage per unit decreased significantly. This means each tenant is using less water, directly leading to lower water bills.
Equitable Billing
Submetering ensures that each tenant is fairly billed based on their actual consumption rather than a proportional flat rate or an estimate based on total building usage.
How DrizzleX Can Help You
DrizzleX allows you to detect hidden leaks, such as running toilets and leaky faucets, to stop millions of gallons of waste each year. It also alerts you to tenants' excessive water overuse. Typically, buildings that use DrizzleX reduce their water bills by 20-40% or more.
And you can expect a pretty quick return on investment (ROI). Buildings with DrizzleX save enough water to cover the entire cost of DrizzleX within about 9 months on average.
Usage Reports
One of DrizzleX's solutions is the "Tenant's Overuse" report. Since many people aren't really aware of their excessive water usage, an accurate report can be very helpful in preventing unnecessary expenses.
Using the reports, you can communicate with your tenants about their water consumption habits and back them up with precise data.
Leak Detection
Leaks can be sneaky because they aren't always visible. With property inspection, you can see the obvious ones. But silent leaks will only show up on your utility bills. DrizzleX gives you water control because you can monitor the water flow in your building.
The system will notify you about where and how much water is being lost.
E-mail Notifications
Once DrizzleX spots the leak, it will notify you via email. The message you receive will include all the details about the exact apartment and fixture that is the culprit, how many gallons were used, how much it will cost you if the problem isn't fixed, and even possible causes for the water waste and how to fix it.
Billing
DrizzleX also allows you to bill your tenants. Tenants conserve water when they are the ones paying for it. You can easily create water bills based on accurate water consumption and bill them fairly.
FAQs About Tenant Billing
What is a tenant billing platform?
A tenant billing platform is a system that accurately measures and charges tenants for their individual utility usage. It helps promote fairness and transparency in multi-tenant properties.
How can tenant billing reduce costs for tenants?
By accurately tracking individual usage, tenant billing guarantees that tenants only pay for what they consume.
What are the benefits of implementing tenant billing in a residential complex?
Implementing tenant billing can lead to significant savings in utility costs, improved conservation efforts among tenants, and enhanced satisfaction due to fair billing practices.
