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How to bill an ADU tenant for utilities

By MeterEase · Published

An accessory dwelling unit (ADU), whether it’s a backyard cottage, a garage conversion or an in-law suite, usually shares water and often electricity with the main house. When you rent it out, you need a fair way to charge the ADU tenant for their part of bills that arrive in your name.

This is general information, not legal advice. Whether you can bill a tenant for a shared utility, and how, depends on your lease and on state and local rules. Some states limit or do not allow formula billing for some utilities; see where RUBS is limited or not allowed and your state guide.

Your options

  1. Include utilities in rent. The simplest choice for one ADU. Price in a typical month and accept the swings. Our guide to utilities included in rent covers how to set the number.
  2. A flat monthly utility fee. Easy to explain, but check that flat fees are allowed where the property sits. See ratio billing vs flat utility fees.
  3. A separate meter or a submeter. Bills actual use. Ask the utility first; a new service can be expensive for a small unit. See how to submeter a duplex, which applies to an ADU too.
  4. A formula split (RUBS). You split each bill by occupants, square footage or both, as the lease says.

The part that’s different: your own use

In a duplex, every share goes to a tenant. With an ADU behind your own house, one of the “units” is you. A fair split counts your household like any other unit, and you pay your share. Don’t put your own irrigation, pool, hot tub or home-office use into the ADU tenant’s share.

Example with made-up numbers

The property’s water bill is $150. The main house, where you live, has 3 people and the ADU has 1. You water the lawn, so you first take out an estimate for irrigation: say $30, which you pay yourself.

  • Bill after your irrigation estimate: $150 − $30 = $120
  • People in total: 3 + 1 = 4
  • ADU share: 1 ÷ 4 × $120 = $30
  • Your share: 3 ÷ 4 × $120 + $30 irrigation = $120

If you skipped the irrigation step, the ADU tenant would pay 1 ÷ 4 × $150 = $37.50, part of which is your lawn.

For electricity, square footage often fits better, because heating and cooling track floor area. Electricity is also regulated more closely in some states; see how to split an electric bill between tenants.

Put it in the lease

Write down:

  • Which utilities the tenant pays a share of
  • The formula, including how your household’s use and any outdoor use are handled
  • How often you bill, when payment is due, and that you’ll send a copy of the bill with the math

Our sample RUBS lease addendum is a starting point. It’s a sample, not legal advice, so have it reviewed for your state.

Show the math every month

Send the ADU tenant the bill, the adjustment for your own use, and their share. When the tenant can see that you took out your irrigation and paid your own share, there’s little to argue about.

MeterEase splits each bill by the formula you choose and emails each tenant their share with the math and the bill attached, after you review it, unless you turn on auto-send for a property. See how it works or pricing.

Split the bill and email every tenant in minutes

MeterEase reads the master bill PDF, applies your method and vacancy rule, and emails each tenant their share with the math shown and the source bill attached, after you check the numbers, unless you turn on auto-send for a property. Plans start at $14/month.

Related

Example numbers in this post are made up to show the math. This post is general information, not legal advice; rules differ by state, city and utility. Check your lease and local rules.