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Billing for shared utility costs

On Behalf of | Dec 9, 2019 | Firm News

While the rental units in a multi-unit residential complex can often look similar, the tenants that occupy them are often very different. Some may like to take long, hot showers, while others may prefer to run their air conditioning units on high nonstop during the summer months. As a landlord, you are in the unenviable position of having to divide up utility costs. Many others in your position have come to us here at Goodkin APC asking how the law requires in this regard.

According to the California Department of Consumer Affairs, the first thing you need to do is disclose to tenants before entering into lease agreements that utility meters are shared across units. As such, utility costs will be shared to a certain extent. This will be with the gas and electrical utilities in most structures, as well as the water in older buildings that do not have separate water meters.

Most buildings have common areas such as lobbies, hallways and laundry rooms that all tenants share, thus justifying the sharing of the costs to keep those areas both comfortable and functional. Disclosing the cost-sharing plan prior to leasing a unit also lets tenants that they will be splitting the costs of keeping their own units livable with their neighbors (giving those that do not want to the chance to walk away).

To split the costs, you can either have the utilities for the building billed to you (and then simply include their costs in monthly rent payments), or you can allow individual tenants to pay for the services are measured through the meters linked to their units (with the understanding that they are sharing the costs of all services in units connected to those meters).

More information on handling tenant expenses can be found throughout our site.