Landlord Study Hall Recap: Water, Sewer, & Trash - Oh My!
If you missed out on our Landlord Study Hall last week, don't fret! We're going to highlight the information you need to know as a landlord in Oregon.
Something as simple as billing back utilities may seem like a no-brainer, but in the state of Oregon, this can easily land you in legal quicksand, owing thousands of dollars in fines if managed incorrectly. Under ORS 90.315, the Oregon Residential Landlord and Tenant Act sets strict rules about utility billing... and it's imperative to follow them accordingly.
First Line of Defense: Write it Down.
Per ORS 90.315, you absolutely cannot bill a tenant for utilities unless your written rental agreement allows for it. The key words here are written rental agreement – oral agreements for utility bill-backs are unenforceable and violate the statute.
Required Disclosures & Details
Specificity is the legal lifesaver your boat needs. Your rental agreement (or the utility bill itself) must include the allocation method, the provider's assessment method, common area charges, and the benefits to others.
The allocation method – written explanation concerning how charges are split amongst tenants. This means the exact formula that is run to determine utility allocation. It is not enough to simply write "RUBS" or "occupant count," Oregon wants your tenants to know exactly how that amount is calculated.
As an example, let's say you own a triplex and the total utility amount for water is $1000. We're going to use a RUBS (Ratio Utility Billing System) method that divvy's the shared utility expense based on the unit size.
Unit A is 800 square feet, Unit B is 550 square feet, and Unit C is 1200 square feet. Total square footage is 2550.
The formula might look like this:
Unit A: (800 / 2550) * 1000 = $313.73
Unit B: (550 / 2550) * 1000 = $215.69
Unit C: (1200 / 2550) * 1000 = $470.58
Now, on your written rental agreement, you might state the following:
"RUBS billing based on square footage, (unit square footage / total square footage) x total utility amount = tenant portion of utility."
The Provider's Assessment Method: you must explain how the utility provider itself calculates the charges.
Common Area Charges – if the utility bill and bill-back include charges for common areas, these must be described "separately and distinctly" - meaning you can't group the common area charges in with the unit charges as one dollar amount.
Benefits to Others – If a tenant pays a utility company directly, but that service benefits you as a landlord (or other tenants), this must be disclosed in writing. An example of this would be if the parking lot light is on a tenant's meter, or if there are common areas that residents are paying for.
The Clock Starts Now
The second you receive your utility bill; you are required to send your tenant their bill within 30 days. This requirement applies in all scenarios, even if you charge a flat rate for utilities.
Fees in the Trap
Okay, bad joke. To avoid the trap of charging a "utility late fee," follow this process as outlined in ORS 90.302:
Legally there is no such thing as a utility late fee. On the first instance of late utility payments, offer a written warning. This provides a paper trail to show that you've attempted to work with and educate your resident.
Charge a fee only for the second instance of noncompliance within one year. *
*IMPORTANT – if you charge this fee, you absolutely cannot terminate this resident for nonpayment of that utility. This is the trade-off of in implementing the noncompliance fee.
Change is good. Most of the time.
Can you change your utility billing method? Typically, you cannot unilaterally add or change utility charges during the lease term. Because utilities are not considered "rules," you can't use the rule-change statute to modify them. In Portland or Oregon, doing so may require a new rental agreement or could potentially trigger relocation assistance obligations which are costly.
The Takeaway
As I'm sure you've learned, it is imperative to pay attention to how your utilities are billed to your residents. Any misstep can cost you thousands of dollars, and as a smaller landlord, this can be detrimental to your business. Stay in-the-know about complicated legislation and upcoming legislative changes by registering for our Landlord Study Hall forum here, co-hosted with Multifamily NW.
Disclaimer: This information is for educational purposes and is not specific legal advice.
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