December 5, 2022
Commercial Property Utility Billing: 4 Common Issues with Utility Cost Recovery
Compared to multifamily properties, commercial properties present unique challenges with utility billing. If your management group is planning on investing in commercial properties (or already have started), don’t overlook these common commercial utility billing issues.
To bolster the value of your commercial property investment, it’s important that you fully recover utility costs each month. Unfortunately, the top 4 challenges of commercial property utility billing have to do with just that – recovering utility costs.
4 Common Problems with Utility Cost Recovery for Commercial Properties
Problem #1. Inconsistent Set Up
The most pervasive problem with utility billing in commercial properties is the inconsistent setup of the utility infrastructure.
Most of these inconsistencies originate in the way commercial property is built and subdivided. Generally, a developer will build a massive shell building. From that shell, units are divided up as commercial tenants sign on and move in.
The problem with this approach is that it almost guarantees inconsistencies in the installation and the hardware used because it’s all done at different times and possibly by different people. This leads us to the next problem.
Problem #2. Capturing the Right Reads
An inconsistent setup of utility infrastructure and meters snowballs into more problems down the line: getting a full and accurate read for each unit.
If you get billed by the utility company for more than what your tenants are paying, then you might not be getting a complete read for a tenant’s usage. To solve this, you will probably need to get an expert to diagnose the problem and how best to remedy the issue given the unique specifications of your property.
Problem #3. Confusion with Transferring Utilities
If you’re acquiring an existing commercial property, the utility infrastructure has already been set up, but there may not be a system in place for transferring utilities as new tenants move in. This could lead to months of unrecovered utility costs.
Move-ins are much more common in multifamily properties, so the process of transferring utilities is more familiar. Make sure your commercial property investments have clear move-in and out procedures to make sure utilities don’t fall through the cracks.
Problem #4: Charging a Flat Fee for Utilities
Many commercial property owners and managers will add a flat fee to the rental cost of a unit to cover utility costs. The problem with this commercial utility billing approach is utilities are never a fixed cost. Some months you may come up well short of fully recovering the cost of utilities.
If you want to ensure you’re recovering as much of your utility cost as possible, you need to bill each tenant based on their usage. There are two common methods to do this – submetering and RUBS.
Utility submetering allows commercial property owners to allocate utility costs fairly among tenants by measuring each unit’s true consumption of water, gas and electricity. This requires having a submeter installed between the master meter for the property and each tenant’s unit to get a full read on each tenant’s exact usage. With that precise consumption data, you can bill back commercial tenants for exactly what they consume and fully recover that cost each month.
RUBS, short for ratio utility billing system, is a billing method that proportionally allocates utility costs to commercial tenants using an industry-accepted formula. RUBS is perfect for commercial properties that can’t use submetering either for technical or practical reasons, and it can be implemented relatively quickly compared to a submetering system.
How to Fix Utility Cost Recovery Problems: Work with a Commercial Property Billing Expert
These four challenges can be answered with one solution: working with a commercial property utility billing expert. They can help you find inconsistencies, capture the right reads, establish a process for tenant move-in and out, and implement submetering or RUBS.
Commercial property utility billing solutions are rarely one-size-fits-all solutions. You need a solution built to the specifications of the property. A utility billing expert is equipped to find the nuances of your property that can impact cost recovery, and formulate a utility billing system that will recover as much of that cost as possible.
Conclusion – Get the Most Value out of Your Commercial Property Investment
Commercial utility billing doesn’t have to be a hassle. When you work with an expert, you can ensure that you’re fully recovering utility costs each month despite the challenges the property may present. This will save you thousands of dollars in lost expenses and ensure that you’re not losing any income on the property.
If you want to fully recover utility costs in your commercial property investments, then work with the experts at Synergy. Get in touch today.