Landlord Licensing & Utility Bill Responsibility Changes
Why did the City make these changes?
With the increasing number of rental properties in the City of Orem, the Orem City Council and staff have felt a need to address two different issues using two different mechanisms.
1) Unpaid Utilities – This issue came to our attention as we learned that nearly 10% of single-family rental property utility bills are sent to collections each year. This number is compared to 0.4 or 0.5% of other residential properties that go to collections. All other rental properties (duplexes, four-plexes, etc.) are already required to be in the name of the property owner. When a bill goes unpaid and goes to collections, the difference is made up by the rest of the Orem residents. It was determined that the owner of the property should be responsible for these shortfalls. This problem is solved by the utilities being in the name of the owner. Owners can still have the tenant responsibly for paying the bill. The $50 license is not applied to these unpaid utilities.
2) Impact on City Services & Ability to Contact Property Owners – A study was done on police calls to various types of residential properties. On average, a rental property will have more calls for police services than an owner-occupied home. In the past, we have also been unable to work with the property owner directly because we didn’t have a simple way to contact them. This fee will provide the City the resources that keeps property owners informed of issues at their property and ensures that the owner is the one bearing the cost of these additional city services, not the rest of Orem citizens. This is where the $50 license is applied. This is similar to how a business license works.
- To transfer a rental property into your name: go to orem.org, New Utilities, and fill out the service application. You will be asked to submit current government ID (driver license, state ID, or passport) and proof of ownership (warranty deed, loan documents, or current property tax records). The tenant’s account will be closed when you put the utilities in your name. Your tenant will receive a final bill for past services.
- After you have put the account into your name, you can log into billpay.orem.org and select Edit Account to add or remove users. You will need the email address of each user you add. This gives tenants or property managers certain rights to access the account or pay utility bills. Please note, you are still ultimately responsible to make sure payments are made.
- Watch for a rental dwelling license invoice to be mailed by the end of July.
- If you have more than one property in Orem, you can add other properties by logging into your account at landlordreg.orem.org.
- Click on “Add New Property”
- Enter the information for the address you would like to add. The first field is the house number, the direction is North, South, East, West; and the drop down menu for last field allows you to select the street number/name
- Click on “Apply”
- You will receive this message: Attention – Thank you for submitting this property address. Your request will be reviewed, and you will be sent a confirmation e-mail within 5 business days. If your property address submission is not accepted or further information is needed, this e-mail will provide an explanation. You can also come to this page regularly to check the progress.
- Alert your property owners about this change (they should have been sent a copy of this letter as well).
- Ask your property owners to put utilities in their own name by following the above instructions, or make the changes for them if you are authorized to do so. The city will require proof that you are authorized to act in the owner’s name (such as a scan or copy of your management contract).
- If you manage many properties in Orem, you may contact the Help Center at 801-229-7275 to request a spreadsheet for transitioning accounts in bulk.
- As a management company, you are required to fill out a short registration form. Please go to orem.org/landlords/ and select Register as a Property Management Company. This allows property owners to designate you as their property management company.
- Watch for rental dwelling license invoices to be emailed by the end of July. The licenses will be in the names of property owners, but you will receive a copy if you are listed on the account.
- Log into your account as if you were to make a payment
- Click on the “Edit Account” tab
- Click on the “Edit” button of the account you want to make changes to
- Click on the “Click here to Add New User”
- Enter the information for the user. A spouse will be a “Proxy Owner”. If you click on “Management Company” a drop-down menu will appear and the rest of the fields will populate with the information provided by Property Management Companies that have registered with us. Proxy Owners (PO), Management Company (MC), and Tenant classifications give those individuals different rights to the account. PO and MC will be able to make changes to the account while tenants will only be able to make one-time payments or set up AutoPay.
- If you feel you have made an error, you can click on “Remove” and it will delete the user/users and their information.
- START HERE
Utah State Code Related to this Program:
- General statute that authorizes municipalities to require owners of residential rental dwellings to obtain a rental-dwelling license
- Statute that owners of multiple dwellings cannot be required to obtain more than one license.
- Municipalities can create disproportionate rental fees (per-unit charges) for rental units if it can be proven they consume a disproportionate amount of city services – mainly public safety. NOTE – we have decided against doing this at this time.
Orem’s Landlord Licensing Program
The City of Orem implemented a landlord licensing program in an effort to address several ongoing issues in regards to rental properties. This program requires that all rental units are licensed and all utility bills for rental properties remain in the name of the property owner.
Why does the city need to make this change with rental properties?
Over the past several years, the City of Orem has seen an uptick in the number of rental properties. In a recent count, there were 3,767 rental property utility accounts (1,306 multi-family & 2,461 single-family homes). While rental properties are an important and needed part of any city, they present a unique set of challenges when it comes to neighborhood preservation, police efficiency, utility payments, and requests for service. We believe that property owners (along with their property manager, when applicable), tenants, and the City should work together to solve these problems.
Here are the challenges posed by rental units from the City’s perspective:
- 1) Approximately $80,000 in unpaid utility bills from rental properties (overwhelmingly generated by single-family rentals) are being sent to collections each year. On average, $30,000 is eventually collected. There are fixed costs with providing utilities to any property within the City. When these bills are not paid, the difference is made up by all other Orem utility customers. Learn more…
- 2) Utility accounts for rental units that are put in the name of the tenant, and therefore turnover regularly, require a disproportionate amount of time to service. Other than single-family rentals, all other rentals have always been required to be in the name of the owner.
- 3) Due to the fact that property owners have never been required to register their rental properties in Orem, the City doesn’t have a comprehensive & up-to-date database of property owner contact information. Collecting the property owner (and property management company’s contact information, when applicable) will enable the police department and others to work with the owners/managers and tenants to rectify any problems at the property.
Unpaid Utility Bills
One of the tools that the City uses to ensure homeowners pay their utility bill is shutting off the water when the bill goes unpaid. Like most services, we allow someone to get behind and do not shut off the water the moment it becomes late. The challenge with rental properties is that oftentimes the tenant is gone by the time we shut off and doesn’t have the same incentive to “get caught up” as a property owner.
One of the arguments we hear is “If the tenant is the one using the water, then why should the landlord be required/responsible for ensuring it gets paid? That is between the City and the tenant.” Only a portion of the utility bill is for water usage. Much of the bill pays for the system’s infrastructure & other fixed costs. Only a small amount of the bill is for the actual water. The needed infrastructure is a direct benefit to the property, and having a functional system enables a landlord to market and rent his/her property. This is why we feel that the property owner should ultimately be responsible for ensuring this bill is paid.
Currently, the City requires the landlords of multi-family properties (duplex, fourplex, apartment buildings, etc.) to keep the utilities in their name. This requirement has always been in place because multiple units are sharing the same water meter and therefore can’t be split up into multiple accounts. In our research, only 0.3 to 0.5% of rental property accounts keeping utilities in the name of the landlord go to collections each year. Single-family rental units have historically had the utility account in the name of the tenant and the data shows that 8 to 9% of single-family rental property accounts go to collections each year.
Disproportionate Amount of Time
The nature of rental properties results in a much higher turnover than is experienced at an owner-occupied property. That isn’t to say that these families don’t contribute in a very positive way to our neighborhoods and schools, but there is still higher turnover and with that turnover comes a disproportionate about of time and manpower needed to service these accounts.
The City uses work orders to track the time it spends on utility accounts. A work order is generally a water shut-off/turn-on or non-routine meter read. This happens when a tenant is moving in or out, has not paid their bill for several months, etc. In our research, about 11-12% of rental-property accounts that have the utilities in the name of the property owner have a work order each year. In contrast, approximately 55% of single-family rental accounts (with the utilities in the name of the tenant) have a work order each year.
It should also be noted that the time spent on these properties isn’t always recorded in a work order. One of the most troubling challenges the City faces with utility accounts in the name of the tenant is when the water has been shut off and someone trying to put the account in the name of another individual in the home. The claim is that the previous renter has moved out. Our employees then need to check lease agreements and other records to make sure the relationship isn’t a husband/wife, brother/sister, roommate/roommate where they want the utilities turned on but aren’t planning to pay the past due balance. This is a time-intensive process, and these problems go away when the account remains in the name of the landlord.
Up-to-Date Information on Landlords
The single biggest complaint our police department receives is the condition of a yard or the activities happening at a home in a neighborhood. These complaints are at both owner-occupied properties and rental properties. With an owner-occupied property, the police department is able to work directly with the homeowner to resolve the problem. On a rental property, the police department generally works with the tenant living at the property. In some cases, this is sufficient. In other cases, however, the tenant is not the only one responsible (abandoned vehicles, overgrown lawns, too many tenants, constant noise complaints, etc.). In these situations, it is imperative that we make contact with the property owner (and property manager, when applicable). Currently, our police department works through county records to obtain the name and address of the property owner. This is challenging for a couple of reasons:
- Phone numbers & email addresses are not listed, requiring us to contact property owners through the mail. It’s very common that someone misplaces or doesn’t read a letter sent in the mail. In contrast, if we were able to quickly call/email/text the owner (and property manager, when applicable), we could fully explain the situation and ensure that the owner has received the complaint. A phone call or email is also much more efficient than writing & sending letters each time there is a concern, and this program would allow for emails to the owners/managers to become automatic.
- Many rental properties are held in an LLC. This makes it more complicated as we do not have a specific name unless we go through an extra step to obtain the names of the individuals associated with the LLC.
Many property-specific challenges take months to address. We want to be reasonable in giving occupants the time they need to clean up the property and come into compliance with city and state laws. It is common that the tenant will move out before we are able to address the problem, so our ability to work with the landlord provides the continuity needed to get to a solution.
A rental licensing system would make notifications to owners/managers automatic. Any time there is a property-related citation or any other issue that the owners/manager needs to know about, they will be notified by email and/or text.
This is a philosophical question that will always be answered differently by people based on their leanings. However, the City has a fiduciary responsibility to its taxpayers and utility customers to collect payment for services rendered. When utility bills go uncollected to the tune of $50k per year, our other customers are left holding the bag. Obtaining utility payments and dealing with ordinance violations are at the core of what we do. We feel it is our responsibility to do this in the most efficient and effective way possible.
The proposed fee is $50 per year. The City will not be implemented a per-unit charge at this time. We believe that property owners (and property managers, when applicable) will help us move the needle on our concerns (utilities and property maintenance) once they are brought in the loop and are part of the discussion. The license will be one per property owner, regardless of the number of units. State law does not allow us to charge more than one license fee to a property owner.
Cities generally handle this issue one of two ways, but both result in the property owner ultimately being on the hook if the bill is not paid. 1) The account can be in the name of the tenant, but the owner is ultimately responsible or 2) The account always remains in the name of the property owner (some cities may allow the utilities to be in the name of the property management company), therefore they are ultimately responsible.
Our proposal is #2. This model is used by Vineyard, Pleasant Grove, American Fork, Nephi, South Ogden, Midvale (and possibly others). In a focus group with both property owners and property management companies, the feeling was that if the property owner was going to ultimately be responsible then this would be their preference. This allows them to get information about the account at all times, including late notices.
There are other cities that operate the way we currently operate (accounts in the name of the tenants and owners not being ultimately responsible), but that not typical.
Yes, a tenant can still pay the bill using all of the mechanisms they currently use (including autopay). One simple way for this to happen is by utilizing using QuickPay. This information is found in the upper right-hand portion of the bill. Individuals with the utility account number can also come in or call in to make the payment. We’ve developed a way to program the system so the property owner (or the property manager, when applicable), through their utility account, can manage the utility bill being electronically delivered to their tenant so the property owner doesn’t have to forward any information along.
However, if the tenant fails to pay the utility bill, the property owner will be responsible for any outstanding balance on the account.
All of the property tax records are kept by Utah County. The City of Orem does not keep any of the property tax information in our system. Furthermore, property tax records do not include pertinent contact information such as email addresses and cell phone numbers which are critical for the timely resolution of problems.
Currently, our police department works through county records to obtain the name and address of the property owner. This is challenging for a couple of reasons:
- Phone numbers are not listed. Being able to call the property owner (and property management company, when applicable) allows us to fully explain the situation and ensure that they have been contacted. It is also much more efficient than writing & sending letters every time there is a concern.
- Many rental properties are in an LLC. This makes it more complicated as we do not have a name unless we go through an extra step to obtain the names of the individuals associated with the LLC.
Only a portion of the utility bill is usage. Much of the bill is to pay for fixed costs of the system (namely infrastructure & operations), and is not to pay for the actual water commodity. This is a direct benefit to the property and having a functional system allows a landlord to rent his/her property.
Like most services, we allow someone to get behind and do not shut-off the water the moment it becomes late. It is uncommon for a landlord to kick a tenant out if they are behind one month and it is uncommon for a car to be repossessed if it is behind even a couple of months.
We understand that hardships and other challenges come up and we want to be reasonable in those situations. However, the shutoff “waiting period” means that the tenant is often already moved out by the time we shut the water off, and does not have an incentive to pay the bill.
In addition, shutting off utilities is a labor-intensive process. Currently, we don’t have the ability to turn off utilities without sending a physical person to the property. We are in the process of changing all of our meters to automatic meters that will allow us to turn off the water remotely.
If you choose to build utilities into your rent, the City of Orem has a budget billing system (similar to Rocky Mountain Power and Dominion Energy). The budget billing system requires you to have one year of history, but we can give you the previous year’s history for the initial year that the utilities are in your name. This system allows for equal payments throughout the year, accommodating for lower use in winter months and increased use in summer months. Also, we will provide a way for your tenant to continue paying the bill; it is just that the bill will be in your name and ultimately your responsibility.
Approximately 75% of rental units already have the utilities in the name of the property owner. For those individuals, the only change will be the new requirement of a rental license.
The item was considered in a city council meeting in December 2020. It was adopted 7-0 and was endorsed by the Utah Apartment Association & a handful of other property owners and property management companies in the meeting.
We have a record of all properties with more than 1 unit at the same address. We will make contact with all of these properties. In our utility system, we have begun marking our single-family homes that are used as rentals. We have also obtained all of the property records through Utah County which will allow us to identify the majority of rental properties.
We will proactively reach out to these properties, but there are backstops in place to ensure that this happens with all of our known rental properties.
This only applies to City of Orem-owned utilities (water, sewer, garbage, streetlights, and storm sewer). This change will have no impact on the gas or electric utilities.
We had a focus group with 2 different property management companies and 4 different rental-property owners in the City of Orem. They admitted that cities that allow the utilities to be in the name of the tenant and do not put the property owner on the hook is their preference, but they understand why that isn’t best for the City. They felt that if they were ultimately responsible for the utility bill, they would rather the utilities be in their name so that they are able to see the account at all times and know if it has been paid. They experience issues with other cities where the utilities are in the name of the tenants, but the property owner is still the one responsible. In those situations, they are unable to get information about the account and are not kept in the loop when unpaid bills are starting to pile up (because they are not on the account). In those scenarios, they find out about the issues when the water is shut off and they are required to pay $350-500 of charges & late fees to turn the water back on.
The need to contact a property owner could happen with any rental property, at any time. It is important that we have the owner’s information for each property so when that time comes, we can make quick contact and our officers aren’t spending unnecessary time trying to track down information about the owner.