What Are Utilities in a Rental?
Before you decide who pays for utilities, it’s essential to understand what counts as a utility in a rental property. Utilities are basic services that make a home safe, livable, and comfortable. Some utilities are essential, while others are optional.
Essential utilities are those that laws often require landlords to provide under the implied warranty of habitability. These are essential because they can affect the health, safety, and habitability of a home. These normally include:
- Water (hot and cold)
- Gas
- Electricity
- Heat
For example, in California, landlords must keep plumbing and heating systems working and provide safe electrical wiring (California Civil Code § 1941.1).
In contrast, optional utilities are services that landlords usually don’t have to provide by law, but tenants often pay for or include them in the lease agreement. These may include:
- Internet
- Cable TV
- Security systems or alarms
- Streaming services, etc.
Are Utilities Included In a Rental?
Utilities are not always included in rent. Whether they are depends mainly on the lease agreement, property type, and local rental market practices. For example, some landlords in competitive rental markets may include basic utilities to attract tenants, while others keep rent lower and require tenants to pay for utilities separately.
However, under habitability laws, landlords must still provide tenants access to essential services like water, heat, and electricity, even if utilities aren’t included in rent.
Common Utility Payment Arrangements
There are a few common ways utilities may be handled when renting a home. The exact setup may vary based on the lease agreement, the type of property, and sometimes the state utility billing rules.
Here are the three most common arrangements:
Tenant-Paid Utilities
Under this setup, tenants set up accounts directly with the utility companies and pay the bills themselves. This is mostly common in single-family rentals where utilities are separately metered.
Landlords should confirm that accounts are transferred to the tenant’s name to avoid being liable for unpaid bills. While this gives tenants complete control over their usage and costs, it also means they are responsible for managing utility payments, due dates, and any late fees incurred.
Landlord-Paid Utilities
In an all-inclusive rental, the landlord pays the utility bills by including them in the rent or by having tenants reimburse them monthly. This setup is commonly found in multi-unit buildings with shared meters. Tenants enjoy the convenience of a single payment, but landlords may face higher costs if tenants overuse.
Some rental properties have separate meters (called submeters) to track each unit’s actual usage of water, gas, or electricity. In this setup, tenants pay landlords based on their individual usage, and the landlord passes these payments to the utility provider without adding an extra charge. Many states regulate submetering to ensure fairness. For example, landlords cannot charge tenants more than the utility company’s actual rates (e.g., Texas Utilities Code § 184.013, New York Public Service Law § 52).
Shared Utilities (Partial Split)
Under this arrangement, landlords cover certain utilities (like water or trash) while tenants pay others (like electricity or gas). This split should be clearly outlined in the lease agreement to avoid future confusion or disputes.
Many states regulate shared billing. For example, Texas Water Code § 13.503 requires landlords using submetered or allocated billing to give tenants clear information on billing methods, past usage, and dispute rights. This arrangement can benefit both parties by balancing costs fairly and making rent more competitive.
Utility Payment Models (At a Glance)
| Model | Description | Pros | Cons |
|---|---|---|---|
| Tenant-Paid | Tenants set up accounts directly and pay providers | Encourages conservation, and the landlord shares no risk | Tenants manage accounts themselves
If the accounts aren’t set up in the tenant’s name, the landlord may face liability for unpaid bills |
| All-Inclusive Rent | The landlord pays all utilities, which are usually included in the rent | Simple for tenants
Predictable expenses |
High risk of overuse may make rent less competitive |
| Partial Split | The landlord covers certain utilities while the tenant is responsible for the rest | Flexible arrangement
Can reduce disputes if clearly outlined in the lease agreement |
Can lead to disputes if billing rules aren’t transparent |
Factors That Affect Who Pays Utilities
Several factors influence whether the landlord or tenant pays for utilities. Understanding these can help you set clear terms in the lease and avoid disputes.
Rental Market Trends
Research the rental market in your area to determine the most common method for making utility payments. Tenants may expect one method over another, so it may make sense for you to adhere to the prevalent pattern.
Property Type
- Single-family homes: Tenants usually pay all utilities directly because each home is separately metered
- Multi-unit rentals: Landlords often cover certain utilities (for example, water bills) as these may be challenging to split fairly when meters are shared.
Rental Market Trends
In some neighborhoods, landlords include utilities to make their rentals more attractive. For example, in high-demand rental markets, bundling water or heating into rent may help attract tenants. In slower markets, landlords may list utilities separately to advertise a lower base rent.
Energy Consumption and Efficiency
Older properties with less efficient appliances and insulation usually have higher utility costs, making landlords less likely to include them in the rent. According to the Environmental Protection Agency’s (EPA) Energy Efficiency Standards Guide, energy-efficient buildings reduce consumption costs, possibly encouraging landlords to cover utilities as part of rent.
Landlords who plan to raise rent can use a rent increase notice to provide proper written notice and remain compliant with state laws.
How to Address Utilities in a Lease Agreement
The lease agreement should clearly explain who pays for each utility to avoid confusion later. A well-written lease agreement removes uncertainty and protects both parties.
Here are the most important points to cover in your lease agreement:
Utility Responsibility
- List every utility, including electricity, gas, water, internet, etc.
- Specify which utilities tenants must set up in their own names
- Clarify which utilities the landlord will provide or pay for
Proper Use of Utilities
- Require tenants to use utilities responsibly
- Note that misuse or waste could be treated as a lease violation, allowing the landlord to issue a warning or notice of lease violation
Payment Method
- Explain how payments should be made, either directly or to the utility provider
- Specify how costs will be calculated (flat fee, percentage, or actual bill) if the tenant reimburses the landlord
- State due dates, late fees, and what happens if a payment is missed
Shared Utilities
- Explain how costs will be divided if there is only one meter for multiple units
- Disclose allocation methods in writing if required by state law
Fair Housing Compliance
- Ensure that the lease treats all tenants fairly and complies with the Federal Fair Housing Act (42 USC §§ 3601–3619)
When updating agreements, landlords can use a lease addendum to outline changes without rewriting the contract. However, sometimes disputes over utilities make it necessary to end a lease before it expires. Landlords who need to take legal action can issue an eviction notice. Tenants who plan to move out early can provide a proper written early lease termination notice.
State Laws on Utilities
Utility laws differ by state, and landlords must follow specific rules when billing or providing services. Many states have rules for shared utilities. Some require landlords to explain in writing how costs are split. Others prohibit landlords from charging more than the actual utility bills.
Here is an overview of the common laws on utilities:
Habitability
Landlords are generally required to provide habitable living conditions, including ensuring access to essential utilities such as water, heating, and electricity. For example:
- California requires landlords to maintain heating, plumbing, and electricity under (CA Civ Code § 1941.1)
- New York law requires landlords to keep apartments safe and habitable, which includes providing heat and hot water (NY Admin Code § 27-2005)
- Texas law requires landlords to provide water and heat (TX Prop Code § 92.052)
Non-retaliation
Landlords cannot shut off utilities to punish tenants (e.g., in TX Prop Code § 92.008)
No Overcharging
Some states prevent landlords from profiting from utilities. For example:
- New York requires landlords to refund tenants for overcharging. If utilities are billed through shared meters (NY Pub Serv L § 52).
Transparency in Shared Utilities
If utilities are shared, some states require landlords to give tenants a written explanation of how costs are divided. For example:
- Texas requires disclosures for water and wastewater billing when costs are divided through submetering or allocation (TX Water Code § 13.503).
What Happens If Tenants Don’t Pay Utilities?
Unpaid utility bills can cause issues for both tenants and landlords alike. However, the exact consequences depend on the lease agreement and state laws. Here are the most common outcomes:
- Service Shutoffs: If the tenants don’t pay, utility companies can shut off service. This can make the rental unavailable and lead to legal disputes over habitability.
- Habitability Issues: Landlords have a legal duty to maintain a safe and habitable property. If the utilities are unpaid and shut off, the unit may violate the implied warranty of habitability.
- Property Damage Risks: Unpaid utilities can cause severe damage to the rental property. For example, without proper heating, pipes may freeze or burst in winter. Without water, sanitation problems or mold growth can occur.
- Financial Recovery: If tenants fail to pay utility bills, landlords may deduct utility costs from their security deposits.
- Eviction as Last Resort: If unpaid utilities create habitability problems or there are ongoing lease violations, landlords may have grounds for eviction.
If tenants fall behind rent, landlords can use a late rent notice to provide a formal reminder and record missed payments.
Final Thoughts
The best way to avoid confusion about utilities is to spell out responsibilities clearly in the lease agreement. Both landlords and tenants should know exactly who is responsible for setting up accounts, making payments, and handling shared utilities.
Remember, while tenants can face consequences for unpaid bills, landlords cannot shut off essential utilities to force payment or remove a tenant. Doing so is considered an illegal “self-help” eviction in most states. Putting everything in writing protects both parties and helps prevent disputes down the road.
Key Takeaways
- Depending on the lease terms, property type, and state rules, utilities may be paid by the landlord, tenant, or both parties.
- Essential utilities like water, heat, and electricity must always be provided under habitability laws.
- Utility payment models include all-inclusive rent, tenant-paid, and shared billing, and each option has its pros and cons for both landlords and tenants.
- Some states regulate shared billing and prohibit overcharging, sometimes requiring landlords to provide written notice of how costs are divided.
- Unpaid utility bills can cause shutoffs, property damage, or eviction, but landlords cannot legally shut off services to force payment.
- Lease agreements should clearly explain utility responsibilities to avoid confusion and future disputes.
