For many investors, utilities have been provided to renters as amenities for years. If not provided as an amenity, owners have increased rent or added an additional, monthly flat fee to compensate for utility usage. Usually, this is because these properties have one shared electric, gas, or water meter for all (or most) of their units. When a property has one utility meter for each type of utility, the owner is legally required to maintain that bill in their name since there is no way to both measure and bill the usage for each unit in the state of Wisconsin unless they choose to install submeters. However, with RUBS, property owners can bill their tenants for their estimated utility usage without installing pricy submeters.
RUBS stands for Ratio Utility Billing System. In the state of Wisconsin, it is a system which allows property owners to bill their tenants for gas usage or for water usage when the property has a shared meter for its units. It also encourages utility conservation.
It’s important to note that only gas and water can be billed to tenants via RUBS in the state of Wisconsin. Unfortunately for owners, there is not currently a way for an electricity bill to be split up via RUBS since multifamily buildings built since March 1, 1980 are required to have electric submeters. However, the water bill can be calculated by taking the number of occupants in each unit into consideration while the gas bill can be calculated by taking the square footage of each unit into consideration.
As alluded to previously, the water bill can be calculated using both the number of occupants in a building and in a unit. To do this, we take the bill divided by the number of occupants in a building, then multiplied by the number of occupants in a unit. For properties that have common areas such as kitchenettes or laundry rooms, owners may choose to contribute 10%-20% to the bill before splitting the bill to accommodate for any discrepancies especially since water bills are generally billed every 3 months and tenants may move in or out between those periods. For example, let’s say that an owner rents out a triplex with a single water meter. Let’s assume that Unit 1 has 3 tenants, Unit 2 has 4 tenants, and Unit 3 has 2 tenants. To keep numbers simple, let’s also assume that the water bill for the months of May, June, and July is $300 and the owner has decided to contribute to 10% of each water bill due to a shared laundry room. We can calculate the bill for each unit using the following: Total Bill x (1 – Owner Contribution) = Total Tenant Contribution Total Tenant Contribution = $300 x (1 – 0.1) = $270 Thus, the total tenant contribution is $270. We now need to split up this amount to calculate what each unit should be responsible for based on the number of tenants using the following:
Unit Contribution = (Total Tenant Contribution / Total #
Occupants) x # Occupants in the Unit
So, each unit’s contribution will be the following:
Unit 1 = ($270 / 9) x 3 = $90
Unit 2 = ($270 / 9) x 4 = $120
Unit 3 = ($270 / 9) x 2 = $60
Therefore, the owner contributes $30, Unit 1 contributes $90, Unit 2 contributes $120, and Unit 3 contributes $60 to the total water bill.
Next, the gas bill can be calculated using both the total square footage of the building and the total square footage of the specific unit. To do this, we take the bill divided by the total square footage of the building, then multiplied by the square footage of the unit. To continue our previous example, let’s say that an owner rents out a triplex with a single gas meter. Again, the owner can contribute a percentage to the bill if they choose to cover any discrepancies. However, let’s say that they do not contribute a percentage on top of covering the common areas in this example. Let’s assume that Unit 1 is 800 square feet, Unit 2 is 850 square feet, and Unit 3 is 650 square feet. In addition, let’s assume that the total square footage of the building, including common areas, is 2,500 square feet. Let’s also assume that July’s gas bill is $250. We can calculate the bill for each unit using the following:
Unit Contribution = (Bill / Total Square Footage) x Unit Square Footage
So, each contribution will be the following:
Common Area (Owner) = ($250 / 2,500) x 200 = $20
Unit 1 = ($250 / 2,500) x 800 = $80
Unit 2 = ($250 / 2,500) x 850 = $85
Unit 3 = ($250 / 2,500) x 650 = $65
Thus, the owner contributes $20, Unit 1 contributes $80, Unit 2 contributes $85, and Unit 3 contributes $65 to the water bill.
Ultimately, RUBS is a beneficial system to help owners cover utility expenses created by tenants.