Amending a lease for utilities?
Question:
I have a family that just moved into one of my rental houses. It’s in the lease that they pay utilities and have the utility service put in their name. This tenant has an old $170 water bill and the city won’t let them put the water in their name until this old bill is paid. I want to leave the water bill in my name and them to pay me for their bill each month. Also I want to give them 6 months to pay the old water bill from their previous address and then to put the water bill in their name. How do I word this in an addendum to their lease?
Answer:
I will first advise you that in many states, water districts have the legal right by statute to hold the owner liable for the tenant’s unpaid water bills even when the water account is in the name of the tenant. Thus, a landlord can end up with months of unpaid bills for which the water district may, again, depending on the state and the water district, be able to file a lien against the property if the bills are not paid. Accordingly, a landlord may end up paying the unpaid water bills even if the tenant never pays the landlord and the landlord will have to evict the tenant. You should determine if this is an issue for the location of your rental property.
If the tenant fails to pay you and it becomes necessary to evict the tenant in order to terminate his use of your water, a court may be less inclined to grant an eviction when the eviction is for an unpaid utility bill compared to if it is for unpaid rent. Failure to pay rent as agreed is usually an easy eviction because the statutes of most sates explicitly make payment of rent a basic duty of tenants.
Furthermore, absent a court order to the contrary, a landlord cannot have the water (or any other utility necessary to provide a habitable dwelling – e.g., gas or electricity) turned off while a tenant is still in possession of the rental property no matter how many months the tenant is behind in reimbursing the landlord for the water or for any other lease default including failure to pay rent. If the tenant is knowledgeable regarding the court system or has an attorney and significantly
delays the judgment for eviction, unpaid rent and, in states where the owner is responsible, unpaid water bills can rapidly add up to serious losses.
For these and other reasons, it is usually better to charge a higher rent that is sufficient to cover worst case usage rather than to charge for the water bill as a separate item. Furthermore, a higher rent allows for a higher maximum security deposit, potentially providing yet additional safety.
The applicant family should never have been allowed to take possession of the unit prior to executing a lease or an addendum thereto which contains adequate clauses regarding the water bills. If the tenant now refuses to sign whatever agreement is subsequently provided him, no matter how good the agreement might be, there will probably be nothing you can do about it other than to proceed to terminate his tenancy. Absent a believable witness on your behalf, the exact terms of any oral agreement regarding the water account issue you may have made with the tenants could be difficult to prove in court, particularly if you are outnumbered by the number potential witnesses within the group of occupants,
whether legally tenants or not who know of the agreement.
In order to avoid such last minute problems, I always recommend that an information sheet be attached to the application form provided to all applicants. There are a large number of other issues that should be addressed in such an information sheet. Most relevant to your current issue, it should identify each utility provider and warn applicants to verify with all utility providers that they will qualify for accounts and that the applicants have the financial ability to cover all
deposits that will be necessary based on their previous payment history with each utility. Those who have bad utility payment histories can be subject to extremely high deposits.
I would be seriously worried about an applicant who cannot come up with $170 to pay the outstanding bill, as such an amount would not usually be considered significant compared to the rent, security deposit, utility deposits, and various other costs of moving from one rental to another rental.
The subject of an information sheet is discussed in some detail in Lesson 11 of our eCourse titled “Managing Income Property” which can accessed via a member’s homepage on LandlordOnline.com.
Although I have several decades of management experience and have created documents for my own use, I am not an attorney and cannot create such documents for others. For such specialized documentation needs the landlord is usually best qualified to generate the necessary clauses. Simply put into concise language the terms you and the tenant orally agreed to.