Phil Querin Q&A - Pass Through of Sewer Charges

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January 15, 2015
Phil Querin
MHCO Attorney
Querin Law

Question. In 2011 we passed through sewer directly to our residents.  It was previously included in the base rent.  The total monthly sewer bill is $2,174.00.  We have 62 spaces and we divided the $2,174 by that number to get $35.00 per month per resident.  

We gave a 30-day notice stating the gross monthly amount of the sewer bill and the amount we were passing thru to each resident.  In our Statement of Policy it says that the sewer is paid by the landlord but that we could change that with a reasonable notice at any time.  Is there anything wrong in the way we handled this?  

Answer.  First, let me ask why we’re having this discussion today, rather than before you began the conversion in 2011?  This is always a risky proposition, since if you converted without following the proper protocols, there could be potential liability.  (On the other hand, one might argue that even if it was done improperly, there is no damage, since the residents actually saved money in the process!) 

 

To rephrase your question, let me ask it this way:  Is it permissible to pass sewer charges directly to residents from (a) the base rent method (i.e. where it’s included in base rent), to (b) a pro-rata method (i.e. where the monthly sewer bill is prorated to each resident based upon the number of occupied spaces in the community)?

 

The short answer today is “No.”  Since the statute, ORS 90.532, is complicated, I will try to paraphrase the prohibition as follows:  For rental agreements entered into on or after January 1, 2010, a landlord and tenant may not amend a rental agreement to convert water or sewer utility and service billing from a method described in subsection (1)(b)(C)(i) (the base rent method) to a method described in subsection (1)(b)(C)(ii) (the prorate allocation method).

 

If your residents are on month-to-month rentals, they “renew” every month.  Thus, every resident who was in the community before January 1, 2010 and is still there today, has a rental agreement that was entered into after January 1, 2010. 

 

As for what to do now, I would recommend that you discuss the situation with your attorney, and proceed upon his or her recommendation. The first order of business is to make absolutely sure that your prorata method worked to your residents’ financial benefit. Secondly, if financially feasible, institute a submetering system, according to the conversion laws.  As for your new residents, here is a paraphrase of what the law says:

 

A landlord may not use a separately charged pro rata apportionment billing method for sewer service, if sewer service is measured by consumption of water and the rental agreement for the dwelling unit was entered into on or after January 1, 2010, unless the landlord was using a separately charged pro rata apportionment billing method for all tenants in the facility immediately before January 1, 2010.  If the sewer service is not based upon consumption of water, you may prorate.

 

For new residents, you do not want to put them on a base rent method with the idea that you can later convert to a pass-through method using a prorata allocation. Oregon law does not permit that method of pass-through conversions today, unless the prorate allocation method existed in the entire community before January 1, 2010.  Good luck!

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