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The lease agreement will state whether the landlord or tenant is responsible for the utilities. Most cities allow tenants to start accounts in their name, but a few cities mandate that the landlord keep utilities in their own name.
Tenants who do not pay their utility bills pose a significant risk to your investment. Unpaid water bills stay with the property, and delinquent bills may even roll over to your property taxes. Keeping utilities in your name, but leasing the property for a higher rent, is one way to reduce the risk of your tenants falling behind on their bills. If you do want the utilities to be the tenant’s responsibility, there are a few enforceable policies to incentivize tenants to pay their bills:
1. Risk of shut-off
If tenants aren’t paying their bills, the utility provider will issue warnings of a shut-off, with the intention of prompting payment. Depending on the provider, it can take months to actually turn off the water, giving time for the bill to creep up.
2. Loss of security deposit
If the tenant has unpaid water bills at the end of their lease, you can deduct the outstanding balance from their security deposit payment.
3. Termination of Lease
By not paying utilities or transferring utilities into their name, the tenant may be in violation of their lease agreement. According to California law, this gives the landlord the authority to send a Notice to Perform Covenant or Quit. If the tenant complies with their lease during the notice, the notice may be cancelled. If the tenant does not comply, they will face eviction.
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