February 22, 2022
4 RUBS Billing Do’s and Don’ts
RUBS is a good utility billing alternative to full submetering. But before you start using RUBS in your multifamily property, there are some do’s and don’ts you should be aware of.
Ratio utility billing, or RUBS, proportionally allocates the total costs for water, gas, electric and other utilities to tenants based on an industry-accepted formula. That formula takes into account factors like square footage, layout, occupancy and more.
RUBS is a fast and inexpensive billing solution that can help improve your cost recovery, allocate costs more fairly, decrease consumption, and improve your property’s net operating income (NOI). While it sounds straightforward, be sure to keep in mind these do’s and don’ts as you look to set up your RUBS solution.
RUBS Do’s and Don’ts
Do – Use RUBS to Recover Utility Costs
Including public utility services in rent can add up to tens to hundreds of thousands of dollars of unrecovered costs per year. That expense quickly diminishes NOI.
The main purpose of RUBS is to recover as much utility cost month-to-month as possible so that you’re not paying that cost out of pocket. Billing back utilities is a great way to decrease your monthly operating expenses and improve your property’s profitability.
Don’t – Use RUBS to Charge More for Utilities
RUBS should never be used as a way to justify charging more for utilities or to try and create profit from billing utilities. It’s only a cost recovery method.
Anything that goes beyond cost recovery can get you into trouble. There are a lot of varying regulations on RUBS. So, depending on your property’s location, you could end up facing penalties. Plus, your property’s reputation would take a huge hit.
Do – Use RUBS if You Can’t Install Submeters
Utility submetering allows property owners and managers to allocate utility costs fairly among residents by measuring each unit’s true consumption of water, gas and electricity. The problem is not every building can accommodate individually metering each unit.
RUBS is a great alternative to submetering. It’s typically used when a building’s infrastructure is too old or complicated for submeters to be installed, or when a property owner requires a less costly alternative to true submetering. RUBS is less expensive than a water, gas or electric submetering system because there is no equipment to buy, install and maintain. RUBS is ultimately less precise than submetering, but it’s still great at helping you reliably recover utility costs.
Don’t – Use RUBS on Properties with 10 or Less Units
RUBS works best when there are a lot of units to spread the utility cost around. If you use RUBS on a property with only a few units, you’ll find that if one tenant causes usage to spike, then every tenant will get a noticeably larger bill.
This increase will likely cause questions, and your tenants will be less likely to pay the bill (which means you won’t reliably recover those costs). Make sure that your property has enough units to spread the cost around.
For properties smaller than 10 units, you should install submeters or charge a flat rate for utilities.
Do – Account for Common Areas in Your RUBS Formula
One of the benefits of RUBS is that you can create an allocation formula that fits your property’s unique specifications. For example: common areas. Make sure you account for them in your RUBS formula.
Including common areas in your billing formula is a great way to make sure you’re recovering as much utility cost as possible each month. Depending on your building’s size, common areas could account for a sizeable portion of your total utility costs. Split that portion of the costs evenly amongst your tenants, so you can recover that cost as well.
In addition to recovering the cost, including common areas in your RUBS formula will also incentivize your tenants to conserve utilities in those areas.
Don’t – Double Charge for Common Areas if Already Accounted For
If you already charge an amenities fee or if you have to pay for each use of a common amenity, then do not include the associated common areas in the RUBS formula. Essentially, you would be double charging your tenants, and that could get you into trouble.
Do – Educate and Give Notice to Your Tenants
Before you start your RUBS, you need to notify your tenants of the change. Make sure they know the reason for the switch and how it will ultimately affect their utility bills. Communicate the terms of the RUBS in the lease agreements. Educate them and answer their questions right away, so you can ensure your transition to RUBS is a smooth one.
Don’t – Implement RUBS Without Notice
Tenants want to know what they’re being charged for and why they’re being charged for it. If you switch your utility billing method without notice, your tenants will have questions. It’s better in the long run to get ahead of those questions before switching to RUBS.
When people have questions about a bill, they don’t pay that bill until their questions are answered. On top of that, you need to make sure that all lease addendums and legalities are satisfied before you can add a new charge to your tenants.
Conclusion – Work with a Utility Billing Expert
Keep these tips in mind as you look to implement RUBS in your multifamily property. Ultimately, many RUBS factors come down to your property’s unique specifications. It pays to work with an expert that can take into account your property’s unique factors.
Looking to move forward with RUBS in your multifamily property? Talk to the experts at Synergy to find out how.