What is ratio utility billing system (RUBS)?

Managing utilities in a multifamily property can be a complex task for landlords and property managers. You might face the challenges of fair cost distribution and encouraging energy conservation among tenants. The ratio utility billing system (RUBS) provides a solution that can streamline utility management, ensuring efficient and accurate utility billing. But what is a ratio utility billing system?

RUBS is a billing strategy that proportionately divides the total cost of the multifamily property’s utilities across all units. With this method, you apply an allocation formula that considers various factors to distribute the utility expenses fairly between your multifamily renters. This alternative method removes the need for individual utility meters, simplifying the billing process.

In this guide, we will explore how RUBS works, its benefits, and how property managers and landlords can implement it effectively. By understanding RUBS, you can provide a fair utility billing system to your tenants, enhancing satisfaction and promoting efficient resource use.

How does a ratio utility billing system work?

RUBS works by allocating the utility costs of a multifamily property to the units based on a predetermined formula. This formula will consider various factors to ensure fair utility cost allocation. These factors typically include:

  • Square footage per unit.
  • Occupants per unit.
  • Number of bedrooms and bathrooms per unit.
  • Number of water fixtures per unit.

The landlord or property manager will receive the monthly utility bill for shared utilities like water, gas, electricity, or trash removal. Using the RUBS method, the total utility cost is divided among the units according to the chosen factor. Each tenant then receives a bill for their portion of the utility costs, which is either added to their rent or billed separately.

Here’s how RUBS works for the different types of utilities:

Electricity

For electricity billing, RUBS typically allocates costs based on the square footage of each unit. This approach ensures that larger units pay a larger portion of the electricity bill, reflecting potential higher usage.

Here’s an example: Your multifamily property has 40 units and totals 40,000 sq. ft. Unit Type A is 2,000 sq. ft. and Unit Type B is 1,000 sq. ft. Your monthly electricity bill is $2,000.

  • Step 1: Calculate utility bill per square footage. $2,000 ÷ 40,000 sq ft = $0,05 per sq. ft
  • Step 2: Allocate utility bill per unit. Unit Type A is 2,000 sq. ft, which means the total is $100. Unit Type B is 1,000 sq. ft, which means the total is $50.

Water

Water usage billing through RUBS typically considers the number of occupants in each unit as the primary factor. This method assumes that more people will use more water, for activities ranging from showering to cooking.

Here’s an example: Your multifamily property includes 40 units with a total of 80 occupants. Unit Type A has 2 occupants and Unit Type B has 1 occupant. Your monthly water bill is $2,000.

  • Step 1: Calculate utility bill per occupant. $2,000 ÷ 80 occupants = $25 per occupant.
  • Step 2: Allocate occupant utility bill per unit. Unit Type A has 2 occupants, which means the total is $50. Unit Type B has 1 occupant, which means the total is $25.

Shared spaces

Shared spaces like laundry rooms, gyms, and outdoor lighting contribute to the property’s overall utility costs. RUBS can allocate these expenses based on the overall usage of the building, ensuring that all tenants contribute to the maintenance of communal areas.

Here’s an example: Your multifamily property has 40 units and 80 occupants. Your shared laundry room and outdoor lighting generate a monthly utility bill of $1,000. You decide to allocate these costs equally among all units, as all tenants have similar access and potential to benefit from these shared spaces. $1,000 divided by 40 units is $25 per unit. Each unit will be billed an additional $25 for the month to cover the utility costs associated with maintaining and using the shared spaces.

What is the benefit of a ratio utility billing system?

Implementing RUBS offers numerous benefits for property managers, landlords, and tenants.

Alternative method to sub-metering

Sub-metering is where each unit is installed with an individual meter and tenants are billed individually. For landlords, installing individual meters can be expensive or not feasible in older buildings. RUBS provides a way to estimate each tenant’s utility usage, allowing for a fair distribution of costs without the need for expensive metering infrastructure.

Fair utility cost distribution for tenants

With RUBS, you can ensure a more equitable distribution of utility costs among your tenants. By using factors such as unit size or the number of occupants, you’re able to allocate expenses in a way that reflects each tenant’s likely usage, promoting fairness across your property.

Encourages tenants to conserve electricity and water

Implementing RUBS can make tenants more mindful of their utility consumption, as they see a direct correlation between their usage habits and their utility bills. This awareness often leads to reduced consumption, benefiting the environment and reducing overall utility costs for the property.

Simplified utility management process

RUBS removes the need to read individual meters or manage numerous utility accounts. This streamlined approach allows for easier and more efficient management of utility expenses.

Higher tenant satisfaction

RUBS can improve transparency with your tenants regarding how their utility costs are calculated. This clarity can lead to increased tenant satisfaction, as they understand and appreciate the fairness and logic behind their utility bills. Enhanced transparency helps in building trust and maintaining positive landlord-tenant relationships.

How to introduce a ratio utility billing system to your tenants

Incorporating RUBS into your multifamily property management strategy requires careful planning and communication to ensure a smooth transition for your tenants.

Here’s a step-by-step approach to guide you through the process:

Step 1: Develop your RUBS formula

You need to decide on the factors you will use to allocate utility costs, such as square footage or number of occupants. It’s important to make sure your formula is fair, easy to understand, and reflects the utility usage of your tenants as accurately as possible. Have legal and financial advisors review your plan to avoid legal challenges and ensure that your billing system is fair and transparent.

Step 2: Notify and educate your tenants

You will need to inform your tenants of this utility billing change will before you plan to implement these changes. You can host informational sessions and distribute educational materials explaining the RUBS process and why you are implementing it. Tenants who fully understand RUBS and its benefits are more likely to support this change.

Step 3: Offer support and open communication channels

Make sure tenants know how to reach you with questions or concerns about RUBS. Offering support and maintaining open lines of communication are essential for addressing issues promptly and keeping tenant relations positive. Utilizing multifamily property management software will enable your tenants to easily communicate with you through dedicated channels.

Step 4: Request feedback

Once RUBS is in place, ask for feedback from your tenants about the process and any improvements they might suggest. This feedback can be invaluable for adjusting the system and enhancing tenant satisfaction.

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