LOS ANGELES—Some landlords with LARSO, the Los Angeles Rent Stabilization Ordinance also known as rent control, properties may be using water utility bills to augment below-market rents, according to Matthew McNicholas, partner at law firm McNicholas & McNicholas. Water utility bills for multi-unit multifamily properties with a single water meter are sent directly to the landlord, who then collects a reimbursement that is not always based on water usage and may be inflated. This is a violation of LARSO, and tenants need to be aware that this could be a potential issue. We sat down with McNicholas to find out more about this problem. Here is what he had to say:

GlobeSt.com: How are multifamily property owners using water billing to violate LARSO, and what is their motive?

Matthew McNicholas: When there is only one meter for multiple dwellings, owners have been seen to use a formula to try and pass-through variable utility costs. This is not based on actual usage, but an averaging based on square footage of the rental unit and the number of residents. This can lead to overpayment. For example, we have had clients charged for utilities we know they did not use because they were out of town. The motive is unclear, but the violation is.

GlobeSt.com: How significant is this problem in Los Angeles, and where is it the most prominent? Is the problem increasing?

McNicholas: It is unclear how significant the problem is. It is obviously not an issue when each unit is metered. So, people in older buildings or developments that were converted from single user to multiuser should do a little investigation.

GlobeSt.com: What role do the utilities companies play in this problem?

McNicholas: Utilities don't play a role. They just issue one bill to the property owner. The property owner then implements the Ratio Utility Billing Systems (RUBS) fee to add an additional cost to tenants.

GlobeSt.com: How do rent-control tenants know if they are victims of this problem?

McNicholas: The RUBS fee is not a secret. It is typically present in the lease and then tenants get a post card once per month telling them what the RUBS fee for that month will be. All a tenant has to do is ask.

GlobeSt.com: How can tenants fight back?

McNicholas: Tenants should complain to the landlord. If that doesn't work, take the issue to the Rent Adjustment Commission (RAC) of the Los Angeles Housing Department that implements LARSO. If, as is common, the RAC does nothing with the complaint, tenants should aggregate themselves and find counsel.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM Digital Member, you’ll receive:

  • Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.

Leasing
Los Angeles
Multifamily
National