Calculating Mid‑Month Utility Charges for Tenants

Answer

When a tenant moves in or out partway through a billing cycle, prorating utilities makes sure both landlord and tenant pay only for the days they occupy the unit. By using a clear, consistent method—often based on daily rates—you’ll keep utility costs fair and avoid billing disputes.

To prorate utilities, follow these steps:

• Confirm the billing period: Check whether your utility company bills on a 28‑, 30‑ or 31‑day cycle. If unclear, use the actual number of days between the meter reads.
• Calculate the daily rate: Divide the total utility charge by the number of days in that cycle.
  Example: A $120 electricity bill over 30 days = $4 per day.
• Count occupied days: Determine how many days the tenant lived in the unit during the billing cycle.
• Multiply and round: Multiply the daily rate by occupied days. Round to the nearest cent to simplify invoicing.
• Include fixed fees: If the bill has fixed service charges or meter fees, decide whether to split them equally or assign them to the tenant for the period they occupied the property.

In some areas, local or state law may restrict how you handle utility billing—especially if utilities remain in the landlord’s name. Landlords are recommended to verify that their proration method complies with regulations in their jurisdiction and is clearly outlined in the lease.

For long‑term leases, you might bundle utilities into a flat monthly fee or use a third‑party billing service that automates proration and sends itemized statements. This approach can save time but may incur additional administrative fees.

Before issuing any prorated bill, it’s advisable to document your calculation process in writing and share it with the tenant along with a copy of the utility statement. For complex scenarios—like overlapping meter reads or disputed billing periods—it’s advisable to consult a licensed local attorney or real estate professional to ensure accuracy and compliance.