Rental property ownership is a rewarding pursuit—in many ways. But there are less-than-glamorous aspects of property management as well. In fact, this really is a game of details. And taking great care of small matters adds up to big differences in property performance, tenant retention, efficient turnovers, and ultimately, successful investments.
One such detail? Utility management. When a new tenant moves in, monitoring utilities and managing transfer of services can prove cumbersome. But if done well, this step can support a strong start to your landlord/tenant relationship, while helping the property owner avoid hassle and unnecessary expense.
So today, we’re getting detailed on how to transfer a water bill to tenants, as well as why you should perform a water bill audit (hint: to save a big hit on tax day). Knowing why this is so important and how to do it can help property owners avoid many of the common pitfalls that come with utility management—and save expenses in the process. Let’s dig in:
How to Prepare for a Water Bill Transfer
One of the first things you should do when a new tenant moves in is get utility bills transferred to that tenant. Otherwise, you can end up footing the bill for your tenant’s water use—at least for some length of time.
To start, make sure your lease specifies who is responsible for all utility payments. In addition, you should double check your local municipality’s rules and procedures to ensure compliance. For example, in many cities, if you want to disconnect service or order a final water read, you should notify the utility provider ten days prior to desired date, and you must have a copy of your deed or rental agreement in order to start service in many cases.
If you haven’t done so already, it’s always a good idea to have a lawyer or a property management expert review your lease, to ensure these details are correctly outlined.
Assisting New Tenants with their Water Bill Transfer
When a tenant is moving into a new rental property, they often have a lot on their mind; between lease agreements and moving plans, details like utility management often slip through the cracks. Help your tenants out by communicating the steps for utility transfers, as well as notifying them of the timeline to get utilities into their name—preferably in advance of or during lease-signing. If there is clarity on the process, your tenants are more likely to quickly take care of the transfer, helping the owner avoid hassle down the road.
On the agreed-upon utility transfer date, the property manager needs to verify that the utility transfer actually took place. The process for transferring varies depending on where you live, so you will need to do a bit of research into the steps required by your local providers—or work with a professional property manager who handles this type of transfer every day. At Epic, we give new residents up to 48 hours after lease signing to complete all utility transfers. We then follow up with the utility providers as part of our turnover checklist, to ensure the process was completed successfully.
In the state of Michigan, landlords can also inform municipalities of water bill transfers by enrolling in the Automatic Transfer of Service (ATS) program. It requires a few steps but allows landlords in Michigan to transfer service responsibility directly to tenants without an interruption in service—a nice touch for your tenants.
Potential Pitfalls in Water Bill Transfer
Issues around utilities may crop up from time to time, so be aware of the pitfalls—and how best to avoid them:
Communication
Prevention is better than any cure, and a great preventative measure is clear communication from the get-go. It’s also a helpful remedy when disputes do crop up.
Make sure that all parties involved are clear on the dates of transfer, who is responsible for what, and when. Put everything in writing to avoid surprises.
Delinquent Payments
There is always the possibility of delinquent payments. Owners can help avoid liability by including a clause in the lease stating the tenant is responsible for utility payments, and notifying the relevant utility company with a written affidavit.
As always, know the laws of your state. In Michigan, landlords are generally not responsible for delinquent gas & electric payments from renters. However, outstanding water bill amounts do get added to the property’s taxes! Meaning ultimately, this is a matter for owner concern.
Which brings us to our game-changing water bill advice:
Pro Tip: Water Bill Audits
Many property managers and owners don’t take the following step, in part because it’s not easy. But at Epic Property Management, we believe this is an incredibly important process, and the savings can be worthwhile. So we handle this for our own properties, as well as those of our clients:
In some states, including Michigan, unpaid water bills get added to the owner’s property taxes. If a tenant doesn’t pay multiple water bills, this can accrue into a substantial amount that the landlord must eventually pay.
We’ve seen property owners receive bills in the thousands of dollars because of this! But we have a secret weapon that helps us overcome the issue: the water bill audit.
Every quarter, we perform a water bill audit on every property we manage. It’s a lot of ongoing work, but it ensures our tenants can never get more than a few months behind on water bills.
If we do find a tenant with an unpaid balance, we send them a reminder and give them 10 days to get the balance paid in full. After that 10 days, we follow up with the city, and, if the water bill is still delinquent, pay the charge on their behalf. We then add the charge to their ledger (plus a late fee) in order to recoup our costs.
This can save the landlords we support thousands of dollars in the long run.
By our estimate, 95% or more of property management companies don’t do this, because of the time and work it requires. But we firmly believe water bill audits are worth it, because they save our clients so much time and money. It may seem like a small benefit, but to us, it’s one of the perks of working with a property management company that knows the rental property game inside and out.
Good Utility Management Leads to a Seamless Tenant Relationship
Since your best path to investment success is attracting quality tenants and keeping them, your rental business depends on a strong and seamless tenant relationship. And when matters like utilities are handled in a seamless, well-communicated manner, tenant relationships benefit, and both parties win in the long run.
Pass It On: Utility Management, Water Bill Transfers, & More
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