Phil Querin Q&A: Recovery of Capital Costs for Installation of Sub-Metering System

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August 25, 2014

Question: I have two questions regarding submetering.  When a community completes the submetering and the tenant is paying back the community for the meter and cost of installation, who owns and maintains the meters from that point on?  The second question is that we have a community that was metered when it was built but the community is on a master meter and paying for water and sewer.  The community wants to give the notices to the tenants regarding submtetering but keep the current meters and not charge the tenants at this time for the cost of metering.  If the community chooses to upgrade the meters at a later date, can we then pass the cost on to the tenant?

Answer:    As for the first question regarding tenants “paying back the community for the meter and cost of installation, I believe you are referring to subsection (4) of ORS 90.537 [Conversion of billing method for utility or service charges.] It is summarized below:

 

The landlord that installs submeters pursuant to this statute may recover from a tenant the cost of installing the submeters, including the costs to improve or repair the existing utility or service system infrastructure necessitated by the installation of the submeters.  There are two alternatives:

 

  1. By raising the rent, as with any capital expense in the community, except that the landlord may not raise the rent for that purpose within the first six months after installation of the submeters; or

 

  1. In a manufactured dwelling park, the landlord may impose a special assessment;

 

  1. It must pursuant to a written special assessment plan and may be adopted unilaterally by the landlord;
  2. The plan may include only the landlord’s actual costs to be recovered on a pro rata basis from each tenant;
  3. Payments may be made due no more frequently than monthly over a period of at least 60 months.
  4. Payments must be assessed as part of the utility or service charge [i.e. separate from the “rent.”];
  5. The landlord must give each tenant a copy of the plan at least 90 days before the first payment is due.;
  6. Payments may not be due before the completion of the installation, but must begin within six months after completion.
  7. A new tenant of a space subject to the plan may be required to make payments under the plan [i.e. even though the system was installed before they arrived];
  8. Payments must end when the plan ends.
  9. The landlord is not required to provide an accounting of plan payments made during or after the end of the plan.

 

You want to make sure you follow one of the two alternatives, as they are the only two methods by which you may recover back the capital costs of the system and its installation.  As for “ownership” of the system, it belongs to you as the owner of the park.  It is treated no differently than if you simply recovered the cost of any amenity via periodic rent increases.  The fact that the tenants pay a pro rata portion of the cost in their base rent does not give them any ownership rights in the amenities paid for. As for maintenance, since you own the system, maintenance is your responsibility.  Of course, you may recover that cost through periodic rent increases.

 

As to your second question, it appears your answer is found at Section 2.f, above which is highlighted above.  Since tenant payments did not commence within the first six months after installation, I believe it would be risky for you to do so now. You will not Section 2. g, which refers to new tenants who came in after the installation.  Clearly Section 2.f was not meant to apply to them.  Arguably, then, you might be able to recover the cost from them going forward.  However, I can see a contrary argument, that since the cost recovery was never made part of a “special assessment plan,” you’re too late for that too.  Your best bet might be to simply include any cost recovery from existing and future tenants through periodic rent increases, since there does not appear to be any time limit on your doing so.  However, you should consult your own attorney on this approach before doing so.