Phil Querin Q&A: Six Questions on Sub Metering (current law)

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Phil Querin

No. 1 Question.Can you describe the step by step process of implementing water submetering with respect to the tenant notification and billing process?

 

 

Answer.  Under the current law,[1]a landlord may unilaterally amend a rental agreement to convert to submetering by giving the tenant not less than 180 days’ written notice.

 

  1. If the utility or service was included in the rent before the conversion to submeters, the landlord must reduce the tenant’s rent on a pro rata basis upon the landlord’s first billing of the tenant using the submeter method. 
  2. The rent reduction may not be less than an amount reasonably comparable to the amount of the rent previously allocated to the utility or service cost averaged over at least the preceding one year. 
  3. A landlord may not convert billing to a submeter method less than one yearafter giving notice of a rent increase, unless the rent increase is an automatic increase provided for in a fixed term rental agreement entered into one year or more before the conversion. 
  4. Before billing the tenant using the submeter method, the landlord must provide the tenant with written documentation from the utility or service provider showing the landlord’s cost for the utility or service provided to the facility during at least the preceding year.
  5. A utility or service charge to be assessed to a tenant may consist of:
    1. The cost of the utility or service provided to the tenant’s space and under the tenant’s control, as measured by the submeter, at a rate no greater than the average rate billed to the landlord by the utility or service provider, not including any base or service charge;
    2. The cost of any sewer service for wastewater as a percentage of the tenant’s water charge as measured by a submeter, if the utility or service provider charges the landlord for sewer service as a percentage of water provided;
    3. A pro rata portion of the cost of sewer service for storm water and wastewater if the utility or service provider does not charge the landlord for sewer service as a percentage of water provided;
    4. A pro rata portion of costs to provide a utility or service to a common area;
    5. A pro rata portion of any base or service charge billed to the landlord by the utility or service provider, including but not limited to any tax passed through by the provider; and
    6. A pro rata portion of the cost to read water meters and to bill tenants for water if:
      • A third-party service reads the meters and bills tenants for the landlord; and
      • The landlord allows the tenants to inspect the third party’s billing records as provided by ORS 90.538.
  6. A landlord may not bill or collect more money from tenants for utilities or services than the utility or service provider charges the landlord. 
  7. A utility or service charge to be assessed to a tenant under the submetering law may not include any additional charge, including any costs of the landlord, for the installation or maintenance of the utility or service system or any profit for the landlord.      
  8. To assess a tenant for a utility or service charge for any billing period using submetering the landlord must  give the tenant a written notice stating the amount of the utility or service charge that the tenant is to pay the landlord and the due date for making the payment. 
    1. The due date may not be before the date of service of the notice. 
    2. If the rental agreement allows delivery of notice of a utility or service charge by electronic means, for purposes of this subsection, “written notice” includes a communication that is electronically transmitted.
    3. If the landlord includes in the notice a statement of the rent due, the landlord shall separately and clearly state the amount of the rent and the amount of the utility or service charge.

 

No. 2 Question. The tenants were given the 180-day notice of water submetering and space rents haven't been raised in a year.  Do I need to do anything else before I start billing them?

 

AnswerNote that the law provides the one-year period runs from the dateof the last rent increase notice. So that means that your last increase need be no sooner than nine months (i.e. 12 months minus 3 months, or 90 days under ORS 90.600 (Rent Increases)if tenants are on month-to-month tenancies). As for what else you need to do, see answers 4) and 8) to Question No. 1, above.

 

No. 3 Question. My understanding is that I have to now lower space rents (in addition to not raising lot rents for a year) equal to what they have individually paid on average.  How long before I can raise rents again?

 

Answer.  The only limitation is the prohibition on raising the rent is a landlord may not raise the rent for purpose purposes or recouping the capital cost within the first six months after installation of the submeters. If the rent increase was for other reasons, I see no limitations. However, I think the “optics” of increasing rents immediately after reducing them as a part of a submeter conversion would raise questions of bad faith under ORS 90.130(Obligation of Good Faith).

 

No. 4 Question.Can I add the billing fee to the water bill?

 

AnswerI am not sure what you mean by a “billing fee”.  ORS 90.536(2) (Charges for Utilities)provides the landlord may recover:

 

  1. The cost of the utility or service provided to the tenant’s space as measured by the submeter, at a rate no greater than the average rate billed to the landlord by the utility or service provider, not including any base or service charge;
  2. The cost of any sewer service for wastewater as a percentage of the tenant’s water charge as measured by a submeter, if the utility or service provider charges the landlord for sewer service as a percentage of water provided;
  3. A pro rata portion of the cost of sewer service for storm water and wastewater if the utility or service provider does not charge the landlord for sewer service as a percentage of water provided;
  4. A pro rata portion of costs to provide a utility or service to a common area;
  5. A pro rata portion of any base or service charge billed to the landlord by the utility or service provider, including but not limited to any tax passed through by the provider; and
  6.  A pro rata portion of the cost to read water meters and to bill tenants for water if:
    1.  A third-party service reads the meters and bills tenants for the landlord; and
    2.  The landlord allows the tenants to inspect the third party’s billing records as provided by ORS 90.538 (Tenant Inspection of Utility Billing Records)

      (3) Except as provided in subsection (2) of this section, the landlord may not bill or collect more money from tenants for utilities or services than the utility or service provider charges the landlord. A utility or service charge to be assessed to a tenant under this section may not include any additional charge, including any costs of the landlord, for the installation or maintenance of the utility or service system or any profit for the landlord.

 

No. 5 Question.Can I add the cost of the water meters AND the installation labor to the water bill amortized over 5 years in monthly payments?  How exactly does this work?

 

Answer.  The landlord may recover the cost of installing the submeters, including costs to improve or repair existing utility or service system infrastructure necessitated by the installation of the submeters, only as follows:

  1. By raising the rent (as with any capital expense), except the landlord may not raise the rent for this purpose within the first six months after installation of the submeters; or
  2. By imposing a special assessment pursuant to a written special assessment plan adopted unilaterally by the landlord. 
    1. The plan may include only the landlord’s actual costs to be recovered on a pro rata basis from each tenant with payments due no more frequently than monthly over a period of at least 60 months. 
    2. Payments must be assessed as part of the utility or service charge. 
    3. The landlord must give each tenant a copy of the plan at least 90 days before the first payment is due. 
    4. Payments may not be due before the completion of the installation but must begin within six months after completion. 
    5. A new tenant of a space subject to the plan may be required to make payments under the plan. Payments must end when the plan ends. 
    6. The landlord is not required to provide an accounting of plan payments made during or after the end of the plan.

 

 

 

No. 6 Question. Do the tenants need to sign a lease addendum?

 

Answer.  Oregon law allows landlords to “unilaterally amend” the rental agreement to provide for conversion to submetering assuming the rental agreement does not already allow the landlord to do so. 

 

In those cases, tenants should each be given an amendment providing that the landlord may convert from pro-rata or in-rent water charges to submetering. There is no specific period after the unilateral amendment that the landlord must convert. The current MHCO rental and lease agreements already provide for this. However, due to the submetering legislative changes effective on January 1, 2020, they will need to be updated.

 

[1]Note that on January 1, 2020 the submetering laws will change. 

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