The most accurate utility cost allocation is achieved with sub-metering. With individual meters installed for each unit, utility sub-metering allows management to bill tenants for actual utility usage per unit. This is clearly this most fair option to tenants and landlords alike as everyone is billed for their exact usage. For example, in a 4 unit property, we would have 5 meters installed; 1 per unit and 1 house meter for common area utility usage. Tenants who use more utilities are billed appropriately; Conservationist tenants are billed less.
Sub-Metering set up costs depend on the building's plumbing and electrical configurations. Total hardware & installation costs average about $350 per unit-- Hardware from $150 to $200 and installations from $150 to $300 depending on building specific configurations.
Some properties, however, will present configurations or construction constraints prohibiting sub-metering as a viable option. We may find the implementation is too expensive or physically impossible to install. In this case, implementing RUBS may be the best option.
Sagareus does this for 4 reasons:
This appears to be more administrative work, but I argue it is much less administrative work over the long term. Updating utility accounts at turn over is one less task on an otherwise busy time, management maintains visibility on all accounts, and all bills are paid at all times, preventing a huge liability if tenant's default on the account.
Both Sub-Metering and RUBS ensure near 100% utility recovery, less fees to the service company. Sub-Metering requires an initial investment for system install, but offers a nice sales feature on the back end of your ownership. RUBS requires no set up fee. Both options require a 3rd party utility billing company to calculate usage and bill tenants directly, which must be monitored by owner or management. Flat fee and Utility Bill back strategies are options for single family properties, both giving total control and visibility to the management team.
Depending on your property, goals, and whether or not you hire property management, neither option may seem worth the effort. In this case, a straight forward Flat Fee utility recovery charge may be your best option.