Utility Meters 101: How Your Property Management Company Can Recoup Utility Expenses

One of the top questions a prospective resident wants to know when they are interested in your property is, “Will I have to put any utilities in my name?”

The answer is largely determined by how your property is metered, and ultimately, how you can recoup those utility expenses from residents. There are several ways a property manager can recoup utility expenses, so let me give you a breakdown of all the scenarios that are possible.

In order to calculate what is owed for each utility, a reading must be obtained from your community’s applicable utility meter. Your property is metered in one of two ways:

Direct metered: This means that there is one meter per utility type, per residential unit. Each meter is read by the utility provider. The utility provider is responsible for calculating those usage charges and billing them directly to your resident. In most cases, the property management company is only responsible for utility charges when the unit is vacant.

Master metered: In master metered communities, there is one meter per utility type, per building. The utility charges for that community are billed directly to the property owner by the utility provider. From there, it is up to the property owner to determine how they wish to recoup those costs. Here’s how that can be done:

  • Submeter Reads: In this instance, individual meters for each residential unit are installed behind the master meter. Those meters are monitored by the owners or the submeter vendor rather than the utility provider. The readings obtained from submeters show precisely the utility consumption for each unit. Either the property management company or a third-party billing provider invoices residents for what they owe.
  • RUBS: RUBS stands for Ratio Utility Billing System. It is a method of calculating a resident’s utility charges that is proportionately based on the number of occupants per unit, square footage or other factors. Either the property management company or a third-party billing company performs the RUBS calculations and bills the corresponding charges to residents.
  • Utilities Included: Some property owners inflate the price of rent to account for monthly utility costs. With this method, property managers must factor in the possibility of rising utility rates, variance of utility usage per season, and local rental rates.

If your community is master metered, you may be wondering which of the above options is best for recouping utility expenses. Our answer: Submeters, if it is structurally and economically feasible for your property. Submeters are a win-win for both the resident and the property owner. Residents benefit because submetering provides them with a precise picture of their utility usage, enabling them to have more control over their future consumption, and if they wish, save money by conserving. Submetering also protects property owners from unbudgeted utility expenses, giving them higher net operating margins. Also, by effectively reducing property expenses, property managers can increase their property value.

When submetering is not a practical option, RUBS is great and fair alternative for calculating utility consumption. The drawback can be the process of making the calculations. This can be complex and time consuming for a property management company, which is why some prefer to outsource this task, along with billing residents, to a third party.

Lastly, there’s including utilities in the price of rent. We recommend avoiding this practice like the plague. For one, you’ll either end up undercharging your residents (meaning you have to pay the difference every month) or overcharging them, which is illegal in some states. Including utilities in the rent also means that your property’s utility bills are going to be much higher than if the residents were paying it themselves. When residents are not the ones held responsible for paying the bill, they tend to consume more. Pair that with having to charge a higher price for rent in an already competitive market, and a “utilities included” model can be quite damaging to a property manager’s bottom line.

If you need any guidance about the best way for your property to recoup its utility expenses, feel free to contact us. We’ll evaluate your current meter setup and go over some personalized options for you to effectively recoup your properties’ utility expenses.

Written by Jennifer Stahlman and originally posted on PayLease

Florida Condominium and HOA Fining Laws are Slightly Different

Question: There seems to have been a lot of change in the law about fining. Has the legislature finally made the condominium statute and the homeowners’ association statute the same on this issue? (C.M. by e-Mail)

Answer: More or less. The legislature is getting closer to making the statutes identical, but there are still a few minor differences. For an overview of the fining (and suspension process), see my column dated September 15, 2016, titled “Association Has Several Options to Enforce HOA Documents.

The first difference is who may serve on the independent committee. The condominium law only allows unit owners to be committee members. Those unit owners cannot be on the board or live with a board member. There is no ownership requirement found in the homeowners’ association statute, although the bylaws would still have some role on the composition of committees. The only restriction in the HOA law is that committee members may not be officers, directors, or employees of the association, or the spouse, parent, child, brother or sister of an officer, director, or employee.

There is also a difference between the two laws regarding the required number of committee members. The Homeowners’ Association Act states that there must be a minimum of three members on the committee, but the Condominium Act is silent. The Florida Not for Profit Corporation Act provides that a committee must have at least two members.

The statutes differ materially regarding the amount of a fine that can be imposed. The Condominium Act provides that no fine may be more than $100.00 per day and the total fine may not exceed an aggregate of $1000.00. The Homeowners’ Association Act contains similar limits, but also allows both a higher daily and aggregate amount if established in the association’s governing documents.

Homeowners’ associations provide that fines of $1000.00 or more may become a lien on the property. The Condominium Act prohibits fines from being secured by a lien.

Written by Joseph Adams and originally posted on Florida Condo HOA Law Blog.

Assessments and Combined Lots in Florida HOAs

Question: I live in a homeowners’ association community. Recently, one of our owners purchased the vacant lot next to their home. The owner has now combined the properties into one parcel with the taxing authorities and is now demanding that the association only charge them assessments for one lot, instead of two. Is this appropriate? (B.R by e-mail)

Answer: Probably not. Much of the answer will lie in the language in your governing documents and the version of the law which existed when they were initially recorded. Generally speaking, combining two lots into one property for property tax purposes, has nothing at all to do with the status of the lots under the governing documents of the association, including (but certainly not limited to) voting rights and assessment obligations.

Combining two lots into one lot for association purposes would be unusual, but not necessarily impossible (which is the case in the condominium context unless you have unanimous approval of all owners). First, you (or more accurately, your attorney) would have to review the applicable revisions of the governing documents. Section 720.306(1)(c) of the current version of the Florida Homeowners’ Association Act generally prohibits amendments to the governing documents which change the percentage by which owners share in the common expenses of the association, unless approved by all owners. However, this is a fairly recent addition to the law and older homeowners’ associations may be subject to a different version of the statute. Also, even the current law allows the governing documents to distinguish between assessment obligations for lots based on the state of development.

However, the mere fact that an owner has combined two lots into one parcel for property tax purposes changes nothing, in and of itself. I suspect an amendment to your governing documents is required and the association’s counsel should be able to assist in stating how that could be done, or if there is any obligation to even attempt to do so.

Written by Joseph Adams and originally posted on Florida Condo HOA Law Blog.