How to Best Recover Utility Costs
Digested from Multifamily Insiders
If your apartment community is master-metered—there is one meter for each utility for each building—you have figured out a way to recover utility costs from residents. But is it the best way?
There are three ways to recoup utility costs in a master-metered community: Install submeters, use the ratio utility billing system (RUBS) or include the utility costs in the rent.
Submeters, in which meters for each residential unit are installed behind the master meter, offer the most precise method for recovering utility costs. However, the apartment community, or a third party like the submeter vendor, must monitor the submeters and then bill residents. The utility company will still bill the apartment community for each building’s usage.
If submeters aren’t an option, then RUBS is the next best cost-recovery method. With RUBS, the apartment community proportionally calculates each unit’s utility costs based on the number of occupants, square footage and/or other factors.
Including the cost of utilities in the rent is generally not recommended. There’s a good chance you will undercharge residents for this cost—especially since utility rates can increase at any point over the course of a lease—and overcharging for utilities is illegal in some states. Also, residents will have no incentive to moderate their water, electrical or gas usage if they aren’t directly paying for those services.