Triplex with one boiler and I'm told I can't bill the tenants for heat

Question

Been in construction long enough to know what a single boiler feeding three units costs to replace, so that part doesn't scare me. What I don't understand is the operating side. Seller pays heat for all three units and it shows up as about $340 a month in the winter months on the utility statements he gave me. My agent said in a lot of places you can't just divide the gas bill three ways and bill it back, and that I'd need real submeters or a formal allocation to charge for it at all. Is that a code thing or a lease thing? And if I'm stuck paying it, does the appraiser or a future buyer discount the building for it?

jordan_ellis2 · Answer

What your agent is pointing at is billing rules, and they're state and sometimes city specific. Several places restrict a landlord from reselling utility service or require a stated allocation formula in the lease before you can bill anything back, and a few require actual submeters. Check your state's rules and the local ordinance rather than assuming, because getting it wrong is the kind of thing that ends up refundable to the tenant. On the value side, owner-paid heat doesn't get discounted so much as it gets priced into the rent. If your $1,200 units include heat and the comparable units down the street are $1,100 plus heat, you're already collecting it, and the exposure is a cold winter where the $340 becomes $500 and your rent is fixed for another eight months. Retrofitting three separate systems into an old triplex is where I'd expect the real money to be, and you'd know that better than me.

Triplex with one boiler and I'm told I can't bill the tenants for heat

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