RUBS and Utility Bill-Backs in an Apartment Building: The Formula, a 24-Unit Example and How to Record Them

What is a ratio utility billing system (RUBS) in an apartment building?

RUBS is a method that divides an apartment building's utility bill among its units by a set ratio, such as floor area or number of occupants. Tenants repay their share. No meter measures each unit.

The building gets one bill for water and sewer, one for gas and one for trash. It pays them. Then it splits part of each bill among the units by the ratio in the lease, and the tenants repay their share with the rent. Bill-backs are one of the income records in apartment building bookkeeping.

What does it mean when an apartment building bills utilities back?

The building pays the utility company, then charges tenants for part of the bill. RUBS is one way to split that charge. A submeter is another.

Whichever method sets the charge, the books record it the same way. Bill-back income sits with laundry, parking and fees in other income in an apartment building.

How is RUBS calculated for an apartment building?

Take the bill for the period. Subtract the owner's share for common areas. Divide the rest by the building's total floor area or occupants, then multiply by each unit's own figure.

1. 1Take the bills for the period. Elm Ave: $1,500 water and sewer, $900 gas, $600 trash, $3,000 in all.
2. 2Subtract the owner's share for common areas. Elm Ave keeps 25%, $750, leaving $2,250 to bill back.
3. 3Divide the rest by the building's total floor area or occupants. $2,250 over 18,000 square feet is $0.125 a square foot.
4. 4Multiply by each unit's own figure. A 600 square foot unit is charged $75.00. A 900 square foot unit is charged $112.50.

The owner's share covers the common areas: hallway lights, the laundry room, the hose outside. Elm Ave uses 25%. That figure is an example, not a rule. The ratio and the owner's share are written into the lease, and the books keep a copy.

What does a RUBS calculation look like for a 24-unit apartment building?

Elm Ave's bills total $3,000. The owner keeps 25%, $750. The other $2,250 is split over 18,000 square feet: $75.00 for a 600 square foot unit, $112.50 for a 900 square foot unit.

Elm Ave, 24 units, one month, invented data

The check: 12 units at $75.00 plus 12 units at $112.50 is $2,250, the amount billed back. If the unit charges do not add back to that figure, the ratio is wrong.

How do you record a utility bill and a bill-back in an apartment building's books?

Record the full utility bill as an expense. Record what tenants are charged as utility bill-back income, a separate line. Never subtract one from the other, or both disappear from the P&L.

Here are Elm Ave's entries for the month. First the bills, then the charge to the tenants.

The utility bills at Elm Ave, invented data

The bill-back at Elm Ave, invented data

When a tenant pays, the operating account goes up and that tenant's balance goes down. The income was recorded when the charge was made, so it does not move again. Here is what the P&L shows done this way, next to the netted version.

Netted, the P&L shows $750 of utilities and nothing else. The $3,000 the building pays and the $2,250 the tenants cover have both gone. Recorded in full, a rise in either one shows next month. Both accounts are in the chart of accounts for an apartment building.

How should an apartment building's utility bills be recorded?

Give each utility its own expense account. Tag every bill to its building. Record it in the month its billing period covers, so one month can be compared with the last.

Elm Ave, utilities by account, invented data

Gas and trash are shown for this month only. With one account per utility, the $100 rise in water and sewer shows on its own line. In one account called Utilities it would be lost in the total.

Tag every bill to its building. Elm Ave's water bill never lands on Oak St's P&L, even when the same owner pays both from one desk. Record the bill in the month its billing period covers, not the month it arrived or the month it was paid. Birch Way, our 50-unit sample building, uses all 4 utility accounts.

Birch Way, 50 units, one month, invented data

Birch Way bills nothing back, so $5,200 is its full utility cost for the month. Utilities are one of the 7 cost groups in apartment building operating expenses. A bill that covers more than 1 month is spread the same way as in accruing property tax and insurance monthly.

How do you check utility bill-backs against the bills each month in an apartment building?

Line up 3 numbers for the same billing period: the bills, the amount billed back and the amount collected. Elm Ave: $3,000 of bills, $2,250 billed back, $2,137.50 collected, $112.50 still owed.

1. 1Pull the utility bills for the billing period. Elm Ave: $3,000.
2. 2Total the bill-back charges made to tenants for the same period. Elm Ave: $2,250 across 24 units.
3. 3Total what tenants paid against those charges. Elm Ave: $2,137.50.
4. 4The difference is what is still owed. Elm Ave: $112.50, 1 unit of 900 square feet. Carry it to next month and check that it clears.

The monthly tie-out at Elm Ave, invented data

Billed back, collected and still owed are 3 different numbers. If the books hold only one of them, this check cannot be run. We run it every month for every building that bills utilities back.

Is RUBS allowed for an apartment building?

That depends on state and local law and on the lease. Ask your attorney before billing tenants. The books keep the lease clause and the method on file either way.

Whichever method the building uses, the books keep the lease clause, the ratio, the owner's share, and each month's bills and charges on file. When a tenant asks how a charge was worked out, the answer is on paper.