Utilities Information
Utilities Information for Cleveland-area Investors
Though many new investors assume that utility accounts and usage are not something they need to worry about, it’s actually something very important to consider when investing in the Cleveland area. In this market, water and sewer utilities are actually lienable to the property, regardless of whose name the utilities are actually in, so it needs to be something that the owner of a property is on top of. Gas and electric utilities are more straightforward, and will typically be in tenants’ names (with no liability assumed by the landlord for the usage), there are cases where the property owner will need to have an account as well, such as between tenants, or when a single meter serves multiple units or provides service for a common area.
Water & Sewer Utilities
Because water and sewer utilities are lienable, it is always advisable for property owners to have these accounts in their own name. If the bill becomes delinquent, the water and sewer usage balance, plus penalties and fees, will be applied to the outstanding property tax owed. For this reason, it’s very important for all property owners to stay on top of this! The good news is that Cleveland Water (which serves many Cuyahoga County suburbs, in addition to the City of Cleveland) and the NEORSD (Northeast Ohio Regional Sewer District) have convenient online portals, where you can get electronic bills and even pay by credit card for no additional fee (so it can be a great way to rack up some extra miles and points along the way).
For a multi-unit property in the Cleveland area, it’s nearly always the case that there is a single water meter for the property, and it is customary that the water and sewer utilities are included in the rent. Occasionally, individual units will have sub-meters, which can allow a property owner to bill the usage back to the tenant. Fortunately, bill-back is much more feasible and typical with single family properties. Though some property managers discourage, or flat out won’t engage in, the billing back of water and sewer utilities to tenants, the majority will structure tenant leases this way if the property owner so chooses. Billing back for usage typically is most practical for C-grade and higher properties (check out the area rating guide if you are not sure what this means), with cash-paying (i.e. not subsidy) tenants.
“House Meters” for Gas & Electric Utilities
House meters are for gas or electricity that is for common areas or shared by multiple units, and it is typically required that a house meter account be established in the property owner’s name. While owners will never have to worry about this for single family houses, it is not uncommon to find a house meter for one or both utilities in a multi-unit property, especially if it has greater than two units.
The utility expenses for house meters providing lighting for common areas, whole-building boilers, etc. should always be taken into consideration when analyzing the expenses for a property with a house meter — While lighting alone likely isn’t going to break the bank (especially if LED bulbs are used consistently), a common boiler for a building (often found in some older quads) can be expected to result in thousands of dollars per year in additional expense for the property owner.