Transferring Energy Bills to Tenants: How to Do It and When Is It Worth It?

Quick Overview

Transferring utility bills to the tenant makes the most sense for long-term leases, especially when it comes to electricity and gas. The tenant then enters into a contract directly with the utility provider, and the landlord does not have to deal with advance payments, overpayments, or underpayments. For short-term leases, it’s usually more practical to leave the utilities in the landlord’s name and arrange for advance payments, which are settled after the bill is issued. A fixed flat rate can be convenient, but it must be set reasonably and clearly defined in the contract to avoid disputes.

Not sure how to address utilities, services, and billing directly in the lease agreement? As part of our lease review service, we’ll help you choose a secure solution and include provisions that reduce the risk of disputes with the tenant.

What payments can be passed on to the tenant?

There are a number of payments associated with using an apartment. However, as the owner, you cannot pass on all of them. For example, you may not transfer the obligation to pay for water, sewage, and hot water from heating plants. You do, however, have discretion when it comes to electricity and gas supplies. It’s entirely up to you.

There are essentially three ways to fairly bill a tenant for electricity and gas:

• The utility accounts can be transferred to the tenant, and it is then entirely up to the tenant to handle payments, overpayments, or underpayments.
• Monthly advance payments are estimated and set for the tenant, and after some time following the provider’s annual billing statement, everything is settled based on the advance payments made.
• Fixed fees are set based on past consumption, and no billing is performed.

Transferring Utility Bills to the Tenant

In the case of long-term and medium-term leases, it is beneficial for apartment owners to transfer electricity and gas payments to the tenant. This eliminates the effort involved in communicating with the utility provider, reviewing the bill they send, comparing it to what the tenant has paid in advance, and calculating any additional amount the tenant owes or that you need to refund. And you’d have to do all of this twice if your apartment is also connected to natural gas.

And on top of that, there’s the subsequent back-and-forth if the tenant disagrees with your calculation. You’ll be relieved of a lot of responsibilities and can leave the worries to the actual user of the apartment. On the other hand, you won’t have control over the payments, so it’s a good idea to at least do a little background check on the tenant and make sure you can trust them. That way, you won’t risk them turning out to be a deadbeat, which could result in the utility company cutting off your electricity.

The transfer process itself isn’t complicated. Ideally, you should meet with the tenant to record the current meter readings together and sign the reading as a sign of agreement. If you trust each other (for example, if you’re renting the apartment to your brother), it’s enough for just one of you to take and record the reading. However, it’s definitely a good idea even in this case to take a photo of the electricity or gas meter and keep the photo as proof. If you have two electricity rates, be sure to record both. You’ll find a form to fill out on your energy provider’s website.

Nowadays, the transfer itself is usually handled online. The future tenant will grant you power of attorney, and you can sign the contracts on their behalf, or you can leave everything up to them.

We know from experience that most disputes don’t arise during the transfer itself, but rather when the lease ends. The landlord and tenant often fail to sign a handover report with the meter readings or take photos of the electricity or gas meters, and later argue over who is responsible for the final outstanding balance. That’s why we recommend keeping not only a signed meter reading but also photos of the meters taken on the date the apartment is handed over.

This approach offers the apartment owner a number of advantages, which we described above. However, it isn’t worth the effort for short-term leases, where you rent out the apartment for a period of a few months or even less. In such cases, it would involve a relatively large amount of paperwork. Furthermore, there is often a time gap between two tenancies. The transfer is, however, necessary even at the end of the lease, when the apartment owner once again transfers everything back into their name.

We also recommend explicitly stipulating what will happen upon the lease’s termination: who will perform the final meter reading, by when the utilities will be transferred back to the landlord, and who is responsible for consumption until the apartment is handed over. If you’re unsure about the wording, we can review your lease agreement or draft an addendum tailored specifically to your situation.

Real-life example: Utilities not transferred back after the lease ends

The landlord agreed with the tenant that the electricity would be registered in the tenant’s name for the duration of the lease. However, upon the lease’s termination, neither the lease agreement nor the handover report specified by when the tenant was to terminate the service or who would perform the final meter reading. The utility provider subsequently addressed an outstanding balance for the period during which the tenant was no longer living in the apartment but the account had not been formally transferred back. Ultimately, the dispute centered not only on consumption but mainly on what the parties could prove. This can be prevented by a simple provision in the lease agreement and a thorough handover report.

Setting monthly advance payments, which you will then bill

This option, on the other hand, is ideal for short-term leases. Property owners base their calculations on the apartment’s past consumption, the number of people who have lived there, and the advance payments set by the utility provider; based on this information, they then specify the advance payments in the lease agreement, which are later settled with the tenant based on an annual statement.

A major advantage is that, as the owner of an apartment or house, you have control over the payments, you know that everything is properly paid, and you choose the utility provider yourself.

A potential drawback, however, is the more complex recalculations required when there are multiple tenants in a single year. This cannot be completely avoided, though. You can calculate the costs yourself based on your knowledge of energy prices and the meter readings when the tenant moves out, or you can wait for the annual statement from the supplier.

In our practice, we frequently encounter situations where a landlord collects a monthly amount “for utilities” from the tenant, but the lease does not specify whether this is an advance payment, a flat fee, or part of the rent. It is precisely this ambiguity that determines whether the landlord can demand payment of any outstanding balance from the tenant or whether the tenant can request a refund of any overpayment.

Another risk is a situation where the tenant stops paying rent—including advance payments—and you then incur additional expenses. However, the risks associated with non-payment of rent theoretically always exist, regardless of your stance on the transfer of utility costs. Therefore, this fact need not play a significant role in your decision-making.

When it comes to advance payments, it is particularly important that the lease clearly specifies what constitutes rent, what constitutes advance payments for utilities and services, when billing will take place, and by when any overpayment must be refunded or any underpayment settled. Reviewing the lease agreement will help you with this, allowing you to establish rules that are clear and enforceable.

Setting Fixed Fees

Under certain circumstances, this may be the ideal solution, but like all solutions, it has its “buts.” It again requires a certain degree of trust between both parties to the lease agreement. The landlord bases the estimate on the apartment’s past energy consumption and prices and estimates future consumption. They take into account the different seasons (especially heating in the winter), add everything up, calculate the average, and then slightly overestimate the total, setting the resulting amount as a fixed fee in the lease agreement.

If you choose this option, aside from the initial calculation, you’ll avoid complicated adjustments for overpayments and underpayments, as well as any administrative work associated with re-registering utilities under different tenants’ names.

However, nothing is without its drawbacks. The tenant may worry that the landlord will, so to speak, “rip them off”—significantly overestimating consumption so that the extra money ends up in the landlord’s pocket. It therefore depends on whether the total rent, including the included utilities, makes sense to the tenant and is worth it for them. A sword of Damocles will hang over the property owner in the form of a wasteful tenant who, figuratively speaking, turns the apartment into a sauna or a cannabis grow room, sending the electricity meter spinning at unprecedented speeds. However, such extremes can be addressed in the lease agreement if necessary.

Also be mindful of the tax implications. If you bill tenants for utilities as actual advance payments and subsequently settle the accounts, the situation is treated differently than if you agree on a single fixed amount without a separate billing process. For flat-rate or fixed payments, we therefore recommend verifying whether they are reflected in your rental income and how to properly record them. In more complex cases—such as multiple apartments or a combination of rent with other services—it’s worth consulting a tax advisor as well.

Summary

Transferring utility contracts to the tenant is particularly beneficial for long-term leases, when you want to transfer responsibility for electricity and gas directly to the person who actually uses the apartment. For short-term leases, it’s usually more practical to leave the contracts with the utility providers in the landlord’s name and have the tenant set up advance payments followed by a final billing. A fixed payment can simplify administrative tasks, but it must be carefully calculated and contractually addressed in case of exceptional consumption. For services related to the use of the apartment, the rules of the Services Act must be followed; for the lease agreement, the rules of the Civil Code apply. The safest approach is to clearly specify in the lease what constitutes rent, what constitutes advance payments, what is billed, who reads the meters, and what happens upon termination of the lease.