November 4, 2022
What Is Vacant Cost Recovery? How to Fully Recover Utility Costs
Are vacancies hurting your utility cost recovery? Unfortunately, it’s quite common for new tenants to delay transferring utility accounts to their name. In this blog, we explain how to prevent this problem from happening and fully recover utility costs, even when utilities don’t get transferred to new tenants in a timely manner.
Whether a new tenant simply forgets to transfer utilities to their name or they’re looking to get away with a few months of free utilities, property owners often end up footing the bill for those months of unpaid utilities.
This may seem like a small problem that isn’t that common. However, if your property portfolio includes hundreds or even thousands of units, there could be dozens of move-ins and move-outs happening each month. That leaves plenty of opportunity for utilities to slip through the cracks. And the costs of those utilities can add up quickly and ruin your utility cost recovery and your NOI.
The solution to this problem is vacant cost recovery. Here’s what this means and how it works.
What is Vacant Cost Recovery?
Vacant cost recovery is a small but important part of a greater utility billing strategy. It’s the process of recovering utility costs from units that have not had utilities transferred into a new tenant’s name.
If a unit does not have a name on the utilities, then that monthly bill will get sent to the property owner or property management group. If you’re receiving bills for occupied units, you or your team must remedy the situation. Here’s how that usually works:
- Determine how many months of payments were missed.
- Inform the tenant and make sure they transfer the bills to their name.
- Bill back missed payments to the resident along with any penalties if your local regulations permit.
Can I Do Vacant Cost Recovery in House?
Yes, you can do vacant cost recovery in-house if you or your property managers have the bandwidth to do it effectively.
However, doing vacant cost recovery effectively takes constant vigilance and careful auditing of move-ins, move-outs and the utility bills your team receives. That takes time away from more essential functions that your managers most likely don’t have.
Working with a Utility Billing Expert on Vacant Cost Recovery: 3 Benefits
If your managers don’t have the bandwidth to take on utility billing and vacant cost recovery, then you should consider working with an expert utility billing service provider. Here’s what you can expect when you work with a dedicated utility billing firm.
#1. Return on Investment
You’ll likely more than cover the cost of a utility billing company through increased recovery from vacant cost recovery alone. When you add in the fact that a utility billing expert can help optimize your utility billing system while billing back residents accurately and on time without your team having to do any work, you’re talking about true cost savings.
#2. Dedicated Expertise
Vacant cost recovery is just one task of a utility billing specialist. Properly managing utilities – and maximizing cost recovery, in particular – requires years of experience and focus.
Regulatory compliance, utility analytics, tenant education, advanced ratio allocation, delinquency monitoring, convergent billing and technical meter installation are all essential parts of managing utilities.
Working with a focused utility billing company allows you to leverage that expertise across a wide range of billing tasks beyond vacant cost recovery.
#3. Better Tenant Experience
Those first two benefits ultimately add up to a better experience for your tenants. Billing errors like late invoices or unfair bills can lead to complaints, more delinquent utility accounts and turnover.
Working with an experienced utility billing company lets you provide the consistency, flexibility and payment options that tenants want. That means happier tenants who tend to stay longer, which is more profitable than turnover.
Conclusion – Don’t Let Vacancies Ruin Your Cost Recovery
Vacant cost recovery is a small part of an overall utility billing and cost recovery strategy, but it’s still an important one. When you work with a utility billing expert, you can ensure that this seemingly small problem doesn’t grow to harm NOI across your property portfolio.
Looking for a new utility billing system and a solution to vacancies and delinquent accounts? Get started with Synergy. We can help ensure consistent utility cost recovery.