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Victory Prop…, Real Estate Pro in Raleigh, NC

Is including the electricity bill in the rent risky for the owner?

Asked by Victory Property Management, Raleigh, NC Fri Feb 10, 2012

Victory Realty 1135 Kildaire Farm Rd. Suite 200 Cary, NC 27511
Serving the Wake County Raleigh Triangle Area, Cary, Apex, Garner, Morrisville, Holly Springs, Chapel Hill, Durham

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It is recommend not to include utilities in the lease for one main reason...If the tenant is in default for any reason(and even good tenants can default), the landlord cannot turn off utilities as remedy. You can't turn off in any case, but you want the risk of default on utilities not to lay in the hands of the landlord. You can only have 2 months rent as security deposit, and this can be swallowed up very quickly with having to pay for utilities in addition to turn the property. All it takes is to get burned 1 time with this and you will never do it again.

The only time it may be appropriate is in a multi unit/family situation where the cost can be spread to multiple users. Usage caps would still need to be established.

It a tenant cannot get utilities in their name or doesnt want to, you should throw your red flag to review!

Jimmy Conder
Conder Realty
919.896.7131
Web Reference: http://www.ConderRealty.com
0 votes Thank Flag Link Sat Feb 11, 2012
I wouldn't recommend it...
2 votes Thank Flag Link Sat Feb 11, 2012
There are risks, however, you can do a few things to protect the owner and yourself, if you're the property manager. First, set a maximum dollar amount per month that will be covered in the lease. If the average bill is $120, then put in the lease that the tenant is responsible for anything above $130, assuming the # of occupants is similar. Also, have the owner set themselves on an equal payment plan with the utility company. That will keep them from having large spikes. Lastly, make sure to collect a large enough security deposit to cover the owner if the tenant were to move out or go way above the allocated utility amount. Obviously, you can't collect more than what State Law allows, but, if the term is at least 30 days, you can collect a security deposit equal to two months rent. Encourage the tenant to conserve energy by offering them a credit equal to what they didn't use vs. what was allocated. My property management division will include utilities, lawn care and even a set number hours of cleaning service per month depending on the tenant's needs. It is usually when working with contracted employees where their company is paying a set housing allowance.

Hope this helps.
0 votes Thank Flag Link Fri Feb 10, 2012
Yes. The owner would have a fluctuating bill over which he/she has little or no control. Tenants tend to be wasteful when they are not paying the electric bill. When tenants do pay the bill they tend to conserve energy.
Web Reference: http://www.clovelake.com
0 votes Thank Flag Link Fri Feb 10, 2012
It depends on what type of A/C and HVAC units a landlord has. Are they efficient? Electricity bills can get pretty expensive since the landlord could not control what temperatures the tenants keep their heat or AC. I would prefer the tenant to pay for their own electricity bill. It is an attractive concept including all ulitities. I suppose the best way to to figure out the rent is take the highest bill amount over a 12 month period and use that as a gange to establish what rent amount to charge. Hope this helps.
0 votes Thank Flag Link Fri Feb 10, 2012
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