Utility Billing Services: Less Risky Business, More Recovery

New owners of multifamily residential property are often surprised at the number of laws that affect their ability to do business. In addition to statewide landlord and tenant codes, an owner electing to pass through the cost of usage and ancillary services must consider the local utility tariffs, city or county ordinances, state utility law and any public service commission (PSC) regulations. Sometimes, the PSC rules may conflict with other local or state laws. In many jurisdictions utility regulations are ambiguous with a dearth of appellate case law to define the vague rules. Penalties for noncompliance can be severe. Owners are often faced with difficult decisions when deciding what recovery methodologies to employ in light of the lack of legal clarity. Therefore, it is important to work with a provider that has a demonstrated understanding of the jurisprudence governing the billing activities. When evaluating such a partner, owners should ask the following: 1. What is the process when a billing methodology is not supported but not expressly prohibited by applicable law? 2. What systems are in place to analyze the risk associated with a billing methodology that is not expressly allowed by law? 3. What is the communications process between the management company and the billing vendor for regulation amendments that affect property operations, billing methodologies or recovery amounts? 4. While the responsibility for employing a recovery methodology rests with the owner, does the billing vendor have a process to assist the owner in analyzing risk to help make an informed business decision? 5. Can the billing provider produce a formal report that communicates the levels of risk associated with specific billing practices? Compliance is only half the battle Complying with the statutes, rules and tariffs governing utility and services billing is only half of the battle. In order to compel the resident to pay for utility usage, the lease must require the tenan...