Phil Querin Q&A - Two Questions on Water Sub Metering

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September 14, 2016
Phil Querin
MHCO Legal Counsel
Querin Law

Question No. 1. We are currently in the process of submetering our community and we have been asked a question by the residents that we run into frequently. This scenario refers to the first month of billing, i.e. January 2017: Tenants ask “If we are being billed for utility usage from November 15 – December 15 and then we pay for usage on our January rent invoice, haven’t we already paid for these services in our December rent, i.e. before the effective date of the submetering? If so, it appears that we are paying for it twice.

 

 

Answer. ORS 90.537(3) provides:

 

If the cost of the tenant’s utility or service was included in the rent before the conversion to submeters, the landlord shall reduce the tenant’s rent on a pro rata basis upon the landlord’s first billing of the tenant using the submeter method. 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. *** Before the landlord first bills the tenant using the submeter method, the landlord shall 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.

 

The source of this confusion lies in the fact that utilities are paid for in arrears (i.e. based on meter readings after the service has been provided). However, rent is always paid for in advance (i.e. before the occupancy commences for the current month).

 

So, on December 1, when you were still charging residents a gross rent figure (inclusive of utilities) from their point of view it was to cover all utilities for the entire month, going forward. Thus, their first direct utility payment on January 15 would appear, from their point of view, to include the December 15 – 31 period, and therefore be a “double payment” – i.e. something they’d effectively paid for in their December gross rent payment. 

 

But in actuality, when the residents paid their gross rent on December 1 – inclusive of utilities – it was correctly used by you to pay the December 15 utility bill which covered the November 15 – December 15 period.  What you paid for on December 15 was never applied by your provider to the remainder of the month going forward, i.e. December 15 to December 31. Thus, the December 15-31 utility period remained unpaid, and could not be paid until the following month, i.e. January 15.

 

On January 1, when the residents pay their new reduced rent, it will not include sewer and water. And on January 15, when they directly pay their utility provider, it will be based upon the water meter readings for the period of December 15 to January 15. 

 

Does this mean that when the residents pay the utilities on January 15, they are picking up one half of a utility bill you should be paying, i.e. the December 15 – 31 utilities?  I don’t believe so. Until their January 15 payment, the utility bill for the December 15-31 period had never been paid.

 

Conversely, if you were required to make a partial payment toward the utility bill on January 15, 2017 covering the last 16 days of December, the result would be that (a) on December 15 you would have paid for utilities going back to November 15, and (b) on January 15 you would have paid for utilities covering the period from December 15 to December 31, i.e. a 45-day period – even though the residents only paid December’s rent.

 

As confusing as this is, I’m comfortable that the residents are not making a “double payment”, in that they are not paying for something that was already paid before, and now they are paying again. The utilities for the period of December 15 – 31 were never paid in December.

 

Question No. 2. Our community was submetered a few years ago.  At first the tenants paid exactly what the city's charges were for water and sewer.  The city had a structured billing arrangement for sewer, which annualized the costs over the entire calendar year. Since sewer bills are tied to the water consumption, annualizing them reduced the summer sewer bills (when water consumption is higher) than they would have been if directly tied to actual water consumption. Then the sewer rates changed with no further annualization.  So the sewer bill is now quite high in the summer. My question is:  What do the submetering statutes say about what can be charged to the residents?  Can a park charge exactly what the city charges for residential water and sewer?  I have read that the owner of the park cannot make a profit on the water charges. But charging the same as the city shouldn’t cause a profit for the owner, should it? 
 

Answer.  ORS 90.536 provides that subject to the following exceptions, a landlord may not bill or collect more money from tenants for utilities or services than the utility or service provider charges the landlord. The statute further provides that a utility or service charge assessed to a tenant may not include any additional charges, including landlord costs for the installation or maintenance of the utility or service system, or any profit added on. Following are the only recognized exceptions under the statute:

 

  1. The cost of the utility or service provided to the tenants space and under the tenants 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 tenants 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) a third party service reads the meters and bills tenants for the landlord; and (b)The landlord allows the tenants to inspect the third party’s billing records pursuant to ORS 90.538 (Tenant inspection of utility billing records).

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