A ratio utility billing system (RUBS) is a utility management solution that fairly divides the utility bill among residents following specific criteria. It distributes the cost of utilities in a multifamily residential object or multi-apartment building when they don’t use metered billing per unit.
In other words, because the individuals’ metered usage is unknown, the household residents will receive monthly bills based on their estimated utility consumption.
Although metered billing with smart meters is the modern solution, it’s not possible everywhere. Therefore a ratio utility billing system should be an integral part of utility billing solutions. In these cases, it’s the only way to distribute the utility costs fairly.
Table of contents
How does the ratio utility billing system work?
In any multifamily real estate, it is ideal to measure the total consumption and the consumption per unit, such as an apartment or office. These submetered units are then separately billed.
But in many cases, this is not possible, or it would demand too many investments. Be it the building is too old, or the installations are built in a way that prevents it.
The purpose of a ratio utility billing system is to divide the total utility bill between all tenants fairly. RUBS will consider the entire utility cost for the property and divide that cost among all residences.
It will bill each resident a portion of the total cost based on the selected criteria. These criteria can be the residence’s square footage, the number of occupants, or the number of bathrooms or bedrooms.
A ratio utility billing system assigns each energy & utility (e.g., water, gas, electric, etc.) its unique formula that distributes the utility usage among the units or tenants.
When allocating the costs, a ratio utility billing system can take into consideration the following criteria:
- Square footage of each unit
- The number of occupants in each unit
- The number of beds and baths
- The number of plumbing fixtures
- The number of gas stoves, dryers, fireplaces, heating, ventilation, or air conditioning
How is a utility billing ratio calculated?
The ratio utility billing system, or RUBS, determines a unit’s utility usage based on single or multiple criteria.
The property management company typically collaborates with a third-party provider to determine what a fair and legally acceptable RUBS formula is.
Water, Sewer, and Garbage cost calculation
Most ratio utility billing system algorithms base water, sewer, and garbage allotments on the occupancy rate per unit. It seems logical to assume that an apartment with a single tenant will use less water than one with two.
The same goes for sewer treatment charges and garbage disposal. More occupants mean more wastewater and more garbage.
For example, let’s say a complex has 100 tenants. If this complex has 100 occupants and the total water & sewer bill for the community is $5,000, then the charge per occupant is $50. A single-occupant home would receive an invoice of $50, and a two-occupant home would receive a charge of $100.
Water bill / number of tenants per complex = charge per occupant
$5000 / 100 = $50
The fairest ratio for water, sewer, and garbage is the number of occupants, but using a combination of unit square footage and occupancy is sometimes recommended. However, some models also consider factors like the number of water fixtures in a unit.
All the variables for the water consumption distribution formula are specified inside the ratio utility billing system. After that, the utility company will run it inside their water billing software.
The calculations can also include questions like whether adding a baby to the unit will increase their part of the cost. After all, compared to older children or adults, infants don’t use nearly as much water.
On the other side, for instance, they can produce about the same or even more garbage than adults. The utility service provider needs to monitor resident data with support from the property management business to ensure that the formula is accurate and fair.
Electricity, Gas, and Heating costs calculation
When individual units lack gas, central heating, or electricity meters, a typical method is to determine expenses based on the unit’s square footage. It makes sense that a larger apartment would require more energy to heat or cool it.
However, landlords and utility companies should consider other factors like the unit design or demographic characteristics. Bigger units don’t necessarily mean they have more tenants or home appliances.
In other words, a successful RUBS formula for one building doesn’t necessarily fit another. All the variables must be reconsidered every time.
Common Areas & other shared costs calculations
If an apartment or complex has shared spaces such as a gym, green spaces, or a laundry room, the utility costs for that area will be shared too.
Unlike apartments, the common practice is that the property owner covers a part of these Common Area maintenance (CAM) costs. In most cases, the owner will pay 20% of the utility costs in common areas. The remaining 80% will be evenly divided between the building’s tenants.
Although this is a matter of discussion, this 20-80 system is generally considered a reasonable compromise.
Benefits of a ratio utility billing system
Property owners, landlords, and tenants of multi-apartment buildings benefit significantly from a ratio utility billing system.
Without proper utility cost calculations, the owners risk miscalculating and, in the end, can end up covering some of the costs from their pockets.
This method of calculating utility payments is more convenient for landlords since they can better estimate the usage of each unit. Without the ratio utility billing system, these cost calculations would sometimes be too time-consuming or impossible.
RUBS generates a steady income by shifting utility costs to tenants. In addition, it can spare property owners the cost of installing meters and allows them to recoup their utility bills precisely. RUBS implementation benefits owners because their overall operating costs go down.
Implementing a ratio utility billing system also raises awareness about utility consumption among the tenants. By paying a fair share of the costs, the tenants get more aware of how much they use their utilities.
They benefit from utility savings by acting more responsibly since it lowers their monthly bills. Implementing RUBS also encourages tenants to report maintenance issues like dripping faucets and leaky toilets.
If the RUBS formula is introduced correctly to the tenants, it will improve the sense of fairness and transparency. By doing so, it strengthens their relationship with property owners.
Overall, the main RUBS benefits include:
- Quick implementation
- Cheaper alternative to metered usage system
- Returns on utility expenses
- Increase in cash flow
- Encouragement to conserve utilities
- Awareness about responsible usage of utilities
How to introduce RUBS to tenants?
Communication and transparency are key to successfully implementing a ratio utility billing system. At first, some tenants may be against it as they prefer the flat rate or “All Bills Paid” system.
If property management can demonstrate the benefits, the tenants’ opinions will undoubtedly shift in favor of RUBS.
Utility businesses usually post a 30-day notice to alter the rental agreement form. They follow up with phone calls to every tenant 15 days before implementing RUBS. It is crucial that they transparently explain the new policy and the new system of utility cost distribution.
Most of the time, knowledgeable citizens don’t raise objections, especially when they get communications describing how they and their neighbors may save money on utilities by using these commodities more wisely.
Landlords should simplify the procedure for tenants to report irresponsible neighbors who misuse resources. After all, it will lower costs for everyone and change the habits of other tenants.
The concept that the individual utilizing the utilities should pay for a share of the costs is difficult to contest. The only thing needed is good billing software adapted to the needs of the utility industry.
Want to get more information about our solutions? Leave a comment below or Schedule a Demo!