Vacant Cost Recovery Fee: How to Handle Resident Utility Theft

Learn how to track and stop resident utility theft at your multifamily properties, while boosting your bottom line by assessing a vacant unit cost recovery fee.

Utilities, one of the biggest expenses for apartment communities, are always fluctuating due to market volatility. But despite rising costs, utilities present a huge opportunity to bring multifamily operators significant savings and added revenue.

These opportunities come in the form of catching costly utility invoice errors, noticing leaks or other issues before they become detrimental, and charging a vacant cost recovery fee for resident utility theft.

Many multifamily companies are inundated with utility invoices on a monthly basis and don’t have the time to audit each one for errors, outliers, and resident utility theft. Instead, they simply check the balance due and issue a payment. Over time, this can be detrimental to NOI.

As reported by Engie, one of the nation’s largest utility billing auditors, at least 17% of utility invoices contain an error. With all the invoices your properties receive, it’s likely many have errors and instances of theft that go unnoticed, which can result in a mountain of unnecessary charges.

“When left unchecked and unresolved, even the smallest billing errors can end up costing businesses hundreds of thousands of dollars. For example, just one wrong digit on a visual meter reading can send bills soaring, or an organization may be on a rate that does not match its needs. Even an unnoticed late fee can add extra costs if not resolved.”

– Engie Impact

How to discover resident utility theft, invoice errors, & outliers

It’s critical for companies, particularly with multiple locations, to have an in-house team or utility bill audit company to regularly audit utility bills before payment is made.

Additionally, if you aren’t closely monitoring your utility bills, you are missing early warning signs for potentially costly problems at the property. For example, an invoice that reflects abnormally high water usage may be warning you about a leak at the property. Catching an issue like that on an invoice rather than when a pipe bursts could save you thousands of dollars.

Audit for opportunities to collect a vacant cost recovery fee

On top of unexpected leaks and invoice errors, your team also needs to be on the lookout for resident utility theft.

Moving into a new apartment is always accompanied with a long to-do list for your residents. One to-do that sometimes falls through the cracks is moving utilities into their name prior to the move-in date. Or, sometimes residents take the utilities out of their name weeks, or even months, prior to their move-out date.

It could be that these instances happen because moving is chaotic. Or the utility theft could be purposeful. No matter the reason, the property management company is stiffed with utility charges that belong to the resident. Unfortunately, utility theft is a frequent occurrence at multifamily communities. And, usually a month or more will go by before the property management company realizes that they are footing the bill for their resident’s utility usage.

Depending on the size of your portfolio and how long it takes for offenders to be identified, utility theft can cost property management companies thousands of dollars per year. That’s why it’s important to mitigate the effects of utility theft by assessing a vacant cost recovery fee. But what is the best way to identify and end resident utility theft?

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Identify and end utility theft

To uncover any erroneous charges, outliers, and cases of utility theft, choose a day of the month for your team members to perform regular utility invoice audits. It’s critical to construct a consistent and standardized process so there aren’t any opportunities for loss.

If you don’t have the resources to regularly perform utility invoice audits in-house, you can outsource utility expense management by working with a provider that will complete the entire process from invoice acceptance, review/audit, to bill payment for you.

This removes the burden from your staff so that your team can focus on higher priorities. It’s also important to find a provider that includes vacant unit cost recovery as part of their utility expense management service.

For instance, Zego’s Utility Expense Management is an automated utility AP solution that eradicates utility billing errors and late fees, and provides full transparency into your data.

Invoice and payment details are integrated into your accounting software along with business intelligence reports so you can track trends and identify opportunities for savings.

The benefits of a vacant unit cost recovery service

Vacant unit cost recovery is the process of examining move-in and out dates of each resident and comparing them with the property’s utility bills. If there is an overlap between the residents’ move-in date and the utility bills the property manager has received, it’s an indication of utility theft.

Some property management companies perform vacant cost recovery in-house. But many simply do not have enough bandwidth and have found that outsourcing this tedious process is more cost effective.

A vacant unit cost recovery service pinpoints the number of violations by resident at each property, quickly identifying where adjustments need to be made. The sooner you are alerted to a potential problem, the higher the likelihood it can be resolved while its effects are minimal.

Even better, some providers will automatically bill back the charges to residents so property managers can recoup their money. And, if local regulations permit, you can elect to automatically assess a fee to offending residents, creating a new revenue stream.

How to charge a vacant cost recovery fee

When it comes to recouping the utility charges from residents, timing is everything. The sooner you are notified about potential utility theft, the sooner you can make efforts to recoup that money and protect your bottom line.

A best-in-class utility platform catches those occupied apartments that do not switch over the utilities and will make sure the property does not cover the costs of their utility consumption. Instead, they add those charges to the resident’s statement and, if applicable, charge a vacant recovery fee.

To help property managers stay ahead of the game, Zego’s vacant cost recovery platform offers same-day notifications. Our Vacant Unit Cost Recovery team notifies property managers about delinquent utility account transfers within a day of each utility’s new billing cycle.

With expedited notifications, property managers can minimize instances (and the financial impacts) of utility theft. Those who also use Zego’s resident utility billing services can then automatically bill any offenders for what they owe, plus any vacant recovery fee they have decided to charge.

Vacant cost recovery services save multifamily companies money while reducing the administrative burdens for their employees. If your organization is struggling to stay on top of vacant cost recovery efforts, contact us to learn more.