Scott: Hi, everybody. I have two buildings in Worcester I bought that had quite a bit of deferred maintenance, and I decided I wanted to do kitchen and bath renovations. Before I went and got into investing, I talked to a bunch of people on that property and one consistent theme that came up after lead paint was water usage. I heard about all the horror stories of huge water bills and multifamily houses with one meter and no ability to know where the water usage is. I learned about this law that passed in Massachusetts. I don’t know much about the law. I’m not a lawyer. I’m not a professional. I’m not a plumber, but I read about it and found out that you can install your own meters to each individual unit in your building and measure the water usage, and so, that’s what I did.
Jim: Is it okay if I do a little graph?
Scott: Yeah, so right here. I just found this main slide here, you can kind of see the general concept that your main water supply comes into your house typically in your basement and then with the city has a meter and they can elect most of the times I think electronically read the meter. That’s how they send you your water bill. After the city meter is your main line and the trick is it depends on how your plumbing is. In my case, we’re renovating, taking out all the old plumbing, so it’s easy. They’re all new lines run up, one main line to each unit, so it was really easy right in the basement to install submeters – oops! Hang on.
So you can see the apartment 1, 2, 3, and the common area. So apartment 1 has a meter on it and then its line goes – every water device from there, your water heater, your furnace, kitchen bathroom, everything in that apartment goes through that meter. Same thing for apartment 2, same thing for apartment 3, and then the outside faucets and any common area water goes through a separate meter. That’s what submetering is.
So now, basically every quarter the city reads the city meter and I read my four meters and my four meters basically equal what the city is billing me, and then I bill my tenants for their usage.
Rich: Did you make that slide yourself?
Scott: I did.
Rich: That’s awesome!
Rich: In addition to that, you have the handout with the summary of the —
Rich: Legal requirements for this? Does everybody have —
Scott: You guys should get this. I’ll also —
Rich: It has the name of the law at the top. It says “water utility submetering,” and it has a bunch of bullet points.
Scott: I’ll also show you the inside this. If you Google water submeter law booklet, you’ll come up with a hit that gets you to this presentation right here. It’s a 25-page booklet that you can find on Google. It’s easy. It’s a PDF file and it tells you all the things that are on this handout and more, so it talks about the whole water law, what tenants’ rights are, what landlords have to do. It tells you when you can submeter, when you can’t submeter, and all that stuff. There’s a lot to it. It’s worth reading.
Rich: Can you actually just buzz through it real quick.
Scott: Yeah. So we’ll just go through the table of contents – who pays for the water, when can a tenant be billed, when can’t they, the public housing tenants have to pay for water, can landlords shut off the water.
Scott: Surcharges include, how does it work, blah, blah, blah. This is just a ton of different questions and it’s very informative. Basically, this is where I’ve learned all the things that I needed to do for —
Rich: Which are summarized on the sheet. Do you have that sheet?
Scott: I have the sheet.
Rich: Actually we’re out of them. We don’t have it.
Rich: Would you mind just kind of reading the bullet points on that?
Scott: So that we can —
Scott: I have this on some slides. Basically, one of the keys that you have to have low — in 1994, I think the plumbing code required certain flow per minute for showerheads, faucets, toilets gallons per flush, low flow stuff. So if you had a certified, inspected, and installed renovation of bathroom, kitchen since 1994, you’re probably already in compliance. If you had older fixtures, then probably you’re not in compliance and that would mean in order to do the submetering, you have to change out your toilets, faucets, and showerheads.
You can see it’s described in these pamphlets, so I can talk about gallons per minute, but you’re not going to remember it anyway, so there’s no point. But the bottom line is you have to have low flow devices. You have to have submeters that are certified for use in Massachusetts. They have to be installed by a licensed plumber. They have to be accurately measured, and there are certain things about the tenancies. You can’t just if you have an existing tenant, you can’t just start doing it. There’s things in the law and like I said, I don’t want to go into too much of that because I’m not an expert on it. In my case, I bought my buildings free of tenants. I didn’t have to go through any of that stuff. It’s in my lease. I write in my lease that the tenant is paying for water, how I do it, how I submeter. It’s all explained in this booklet, okay?
Rich: Real quick because this part is really, really, really important to avoid problems. We’ve actually asked the judge about this and they enforce this stuff if it ever comes up. Under qualified tenancies on there, it’s like the third section down, it says, “Upon the commencement of a new tenancy in such dwelling unit and only if one the dwelling unit is being occupied for the first time.” That’s really your safest bet is when you have somebody moving into the building for the first time. That’s what the law is designed to do, and it goes through and it specifically says, “The previous tenant was not evicted without cause.”
The previous tenant, if the law actually cares about how that unit came to be available for rent, so you can’t just toss out your current people who you can’t charge for the water and replace them with new people that you can charge for the water. The law is very, very specific about this. The prior people have to be booted out for not paying their rent or for cause. It can’t be without cause.
“The new tenant was not relocated involuntarily from another dwelling unit in the same building or the same complex.” You can’t move somebody from the third floor down to the second floor, call it a new tenancy, and start billing them. I guess that was my idea. I guess they already thought of that, so you can’t do that. Other thing and you definitely can’t just create a new lease with an existing tenant. The law is pretty specific about it. You have to have it a lease. No public housing at all. You cannot shut off the water utility if they do not pay, so really you cannot enforce this in any other way other than taking them to court if that came up. If there’s ever a plumbing leak, the law says you have to rebate them for that.
With that, we’re probably going to have some questions at the end. I see some hands going up. Jim has a lot to contribute to this, so I’m going to pass this along to him for a minute.
Jim: [unintelligible 0:08:00] The main idea here is like everything with Massachusetts law, it’s heavily in favor of the tenant, so they have dotted every I, crossed every T to make sure that the landlord is not taking advantage of the tenant. That’s the basic idea there. But yeah, I’d like to take questions during the —
Scott: Hey, Jim.
Jim: You wanted to —
Scott: What I wanted to say was the thing about this, the way I talk to my tenants about this is I explain to them that it’s to their benefit because you’re living in a building with a whole bunch of other people. If you’re a conscientious person and you’re not wasting water, then you’re only going to pay for what you use and the other tenants are going to pay for what they use. If they want to wash a pair of socks and a whole load of laundry and run the dishwasher for a couple of forks, that’s up to them but they can pay for it. My tenants seem to like that concept. Roughly what you’ll find is on average, Massachusetts has a target that they want to drive everybody towards, which is per person in a household is 65 gallons per day average usage, so that’s high. I can tell you that’s high.
If you’re consider what I consider a normal water user, you should be able to use 50 gallons a day per person. If you calculate that out, that comes out with Worcester’s water and sewer rates right now, that’s about $20 a month per person. If you are looking at three people in the house, $60 a month, $180 a quarter; that’s what you’re talking about. It depends on where you are and what your tenants are. In my particular case, my tenants don’t have an issue with it.
Rich: So $20 per person? That’s actually a pretty useful metric to use. It’s a measure —
Scott: That’s what it is currently. As the rates go up and stuff, it will change, but that’s what it is now.
Rich: I hear that rates are going up in a lot of towns.
Scott: Yeah, right.
Female Audience 1: I just got my water bill yesterday for this quarter. It was $1,750.
Female Audience 2: Oh, my goodness!
Male Audience 1: [unintelligible 0:10:11] property.
Female Audience 1: That’s the house I live in and nobody is ever home. I mean something has got to be wrong.
Scott: Yeah, yeah.
Rich: Yeah, you might have a plumbing leak somewhere.
Rich: [unintelligible 0:10:28]. So Scott has done this. Jim has started the process and we have a plumber here, so we’re just going to kind of turn this into absolute chaos and just start asking everybody questions, okay?
Peter: What’s the logic behind the fact that a tenant cannot waive that and allow it to happen while they’re in there?
Scott: That’s the law. I don’t know.
Peter: Say somebody is already there and they think it’s a great idea but according to the law, it has to be a new person. What’s the logic behind that?
Rich: Scott, did you write the law?
Scott: I don’t know. I’m not a lawyer.
Rich: Yeah. Be nice to Scott. It’s not his fault.
Jim: I think they don’t want you to kick out – they don’t want to have the event of having the meter put in as an event that allows you to kick people out to order to start charging for the water.
Peter: [unintelligible 0:11:21].
Rich: They cannot. You cannot start a new lease and have them sign. Starting now, you’re new tenant.
Peter: On my part, but they want it.
Rich: They can’t.
Female Audience 2: [unintelligible 0:11:36] the water?
Peter: [unintelligible 0:11:38] they want.
Rich: Yeah. Well —
Female Audience 2: That’s why it’s [unintelligible 0:11:44].
Male Audience 2: Is that in the last slide?
Rich: So we’re going to get into a little bit about the logistics of how this is done in different-sized buildings.
Male Audience 2: I don’t know how long this takes up. I don’t need to [unintelligible 0:11:55].
Male Audience 3: Present tenant is because you’d be changing their rent. That’s why the law is the way it is because you would be charging them for the water and you’re charging them for the rent, so what you’ve done is you’ve illegally increased. I was around when they first started that and that’s the reason they put the law in. You have a tenant, you cannot do that because you’re changing their money. That’s why it is.
Rich: But you’re allowed to change the rent, so if you want to charge more money, maybe rent is the easier way to go. Well, you know it’s probably a good idea to try to pick people who are going to pay stuff anyway. I’m going to come up front.
Scott: You know one point I could make and somebody correct me if I’m wrong about this, but there’s the revenue generation part of this and then there’s the control part of this, right? There’s the managing your property part of this. If you want to go and spend the money to install the meters so that you can personally know where the usage is, I don’t think the law prevents that.
Male Audience 4: As long as you’re not charging them.
Scott: as long as you’re not charging the tenants. I mean it depends on who you are. I mean here’s a slide here that just says, “I called a plumber friend of mine and I said if you got all old fixtures, and you needed to redo, there’s problems with you may not be able to do it. So if you decide you want to try to submeter, you may have to — if you’re not good enough with like looking at a plumbing in the basement and figuring stuff out, you might have to have a plumber. The plumber that’s here could tell you this, look at the situation to see if it’s going to be feasible because depending on how things are run, it could be more feasible than it might not be feasible. Anyway, so if could be done, you might decide to spend some money to do it. You wouldn’t even have to put the low-flow fixtures in the apartments. You could just install the submetering equipment so that you could measure the usage per unit to help you manage the situation better.
Male Audience 5: I have had submeters for 30 years, and the way I did that, not to charge the tenant at all. I just wanted to see how much I was using.
Male Audience 5: And that actually it’s the first step I would think.
Male Audience 5: Better than just charging [crosstalk 0:14:28] people.
Scott: Yes, exactly, and one thing I’ve recently come across is that if you do feel that the tenants aren’t going to be happy, they’re not going to accept this, an option is to say, “Okay, forget about the — ” Let’s say you come into a situation with an empty building and you have submeters. You could say that, “Okay, look this is what Massachusetts is targeting per usage. I’m including that level of usage in your rent. Anything above that, you’ll be billed for, right?” So you can do it different ways but you have to have the equipment in there, and you have to follow the law if you’re actually going to bill them.
Rich: That’s a really important point in general that Scott is making is there’s what you can do legally and what you can’t do legally. But a lot of it comes down to people relations and how you explain things and how you are with people and that really means a lot more than a lot of this other stuff assuming that you are all in compliance with the law anyway.
Anyway, so we have George Chapman here who is kind enough to come and talk to us. He’s a plumber. He’s going to tell us a little bit about logistically what it’s like to get this done in different-sized buildings. I know you’ve worked on a lot on triple-deckers, right? Who in here has a triple-decker? Okay, that’s a lot of the room, okay so that means that if the other half of the room has buildings of other sizes as well. Yeah, I’m pretty quick with the math, right? George, Scott put up a really nice diagram of how the metering is set up. Now assuming that you go into a house where you don’t have four supply lines or really eight because you need four cold and four hot, right? Assuming it’s not set up that way, then what?
George: Well, that’s one you have to locate where the main line comes off of and goes up to the first floor, the second floor, and the third floor. We have to locate that in the basement because that’s where shutoff. Now all the buildings that have been remodeled within the last 15 years is required if there was a permit pulled for it, requires a shutoff for each individual floor. What happens with that is that’s where you put the submeters in right before the valve [unintelligible 0:16:42]. One, you can put a valve out in the front of the meter, one after it. It just helps out with service. That’s the biggest cause with submetering just locate in making sure we have three separate cold lines going to each apartment, okay? That’s your first cost.
Submeters are great for keeping track of what your tenants are using and I’m going to give you an example. I have a landlord [unintelligible 0:17:12]. She owns several buildings and she had a $1,700 water bill for a quarter. Now her normal water usage was only $300 to $400, so she called me in. We went it. We could not find no leaks. We could not find any reason why it was like that. This is where the submetering will come in useful. You would know which floor was using what, come to find out the third floor tenant was doing laundry for her sister, her brother, and a nephew. That’s a lot of laundry. He was talking about 60 gallons per day. They were using almost 300 because she had old-style wash machines.
Now I’m going to stand by here afterwards and give you a lot of examples how to save water, okay, through your tenants.
For instance, I have a complex in Worcester that has 50 units. Now he switched over from a well to city water when Wal-Mart went in there. What happened was the town made him do that. He also had to put in a sewer injection system into this. His first water bill was $8,000. Yeah, $8,000. He called me up and we had to find out where all those water was going. We started replacing toilets because he had a lot of old toilets. Now he had a well before, so he didn’t care how much water was being used. One of the biggest things that we noticed is everybody does it here.
Who stands in, turns their tub on, and waits for the water to warm up? That becomes wasted water. What we did is we put recirc lines to the farthest apartments, and what happens is when that person turns up hot water on, they got instant hot water. A lot of water is being wasted from tenants using and waiting for that water to get to the third floor and at that point in time, you as a landlord is saving money because you’re not standing there waiting for the hot water to come. As soon as it leaves the tap, it’s wasted water. Not only have you wasted the water, but you’re paying for it to go down the drain.
Male Audience 6: They don’t mind.
George: Yeah, so there’s a lot of ways to save money. If you want to talk to me after, you got it.
Rich: So there are a lot of ways to save money on your water bill. It also would help if you can put up the submeters, you can tell which floor to focus on if there is somebody running a Laundromat at our apartment. Now, for the —
George: Just keep an eye for them on who is using the most.
Rich: Like over here, there is a common area submeter on Scott’s slide here. Just like with electrical panels, if you have a triple-decker, you have to have four electrical meters, right? You have to have the first floor, second floor, third floor and the common area. Do you have to have a common area submeter?
George: Well, I’m always against putting steel cocks on the outside of the house for tenants because you drive by your property — and I have one property. I go by the area and I see them washing their car. I’m paying for that water. Spencer is worse than Worcester with the water rates they have today. I disconnect and I put locks on them. That’s what you would have a common submeter. That’s for your steel cocks. Anything that’s got downstairs, it needs a faucet hooked up to it.
Scott: It depends on the meter that you buy. I mean you can figure out $100, you can get a submeter. For $100, if you want to have that outside water, at least you could measure the usage, and if you weren’t, you know your tenants are, so —
Rich: I know you can buy the submeters on Amazon. Where did you guys look into to buy your submeters?
Scott: You just Google submeter, you’ll see a whole bunch of stuff out there. I bought mine off of this place called Submeter Solutions. It’s a website.
Rich: How about you, Jim, when you were doing research for this?
Jim: I bought a whole bunch of them from surplus from a water utility in New Jersey. It’s $40 each.
Rich: All right, so we’re making use out of these people from New Jersey tonight [laughter]. All right, that’s good news. All right, so Scott, this is something that you’ve done and you’ve implemented. So you pay your water utility and you collect it from the tenants?
Rich: How has that going for you so far?
Scott: It’s very cool. Once a quarter at the first of November or the first of February, I go out and I read the meters, write them down, record them in my meter reading sheet, and then I have an invoice form that I fill in. It’s an Excel sheet that calculates the — I have to check you have to check to make sure that you know what their water rates for Worcester because they just raised them recently, and water and sewer rates. You just adjust that on a spreadsheet. It prints out the PDF file and I email that to my tenants and I include in their next round of payment.
Rich: All right. I know we still have questions about this. Now two segments in a row, we’ve gone overtime, so I apologize for that. As our landlord panel, can you guys hang around for a couple of minute afterwards because I know there are people who have questions for you? George, you said you could stick around, too. I want to talk to you, too, because I replaced 19 toilets last year, but I still like my water bill to go down.
So as we move on, let’s give everybody a hand who helped us with the water submetering [applause].
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