Money MeterEase blog
Who pays for common-area utilities in a rental building?
Most master utility bills cover more than the apartments. Hallway and exterior lights, a shared laundry room, landscape irrigation, a pool, or an office can all run through the same meter as the units. When you bill tenants back, you have to decide whether those common-area costs go into the split or stay with you. This post walks through the options with clearly labeled example math.
Example numbers in this post are made up to show the math. This is general information, not legal advice. Some states regulate what landlords may include when they allocate a master-metered bill, so check your state’s rules before you decide.
What counts as common area
- Separately metered. Many buildings have a “house” or common-area electric meter for hallways, exterior lights and shared equipment. If it is on its own bill, the decision is simple: you choose whether to pass it through at all.
- Mixed into a master bill. Water is the usual example. Irrigation, a laundry room, or a hose bib often runs through the same meter as the units, so the bill does not separate them.
Option 1: Owner pays common-area costs
You keep common-area utilities as an operating cost and split only the part tied to the units. Many landlords see this as the easiest position to explain: tenants pay for what their households use, and the owner pays for the property.
If the common-area use is on a separate meter, leave that bill out of the bill-back. If it is mixed into a master bill, you need a way to estimate it and take it off the top before you split. Common approaches:
- A fixed percentage. For example, take 10% off the top for irrigation and laundry. Put the percentage in the lease and use it every month.
- A seasonal deduction. Compare winter bills (little irrigation) to summer bills and use the difference as your irrigation estimate for summer months. Explain how you did it.
- A submeter on the common area. A meter on the irrigation line or laundry room measures it directly. This costs money up front, but removes the guesswork. See RUBS vs submetering for the trade-offs.
Option 2: Common area goes into the split
Some leases pass the whole bill through, common area included. That recovers more, but tenants may push back once they understand they are paying for the landscaping. If you do this, the lease should say so plainly, and the statement should not hide it. Check your state’s rules first; our state guides link the statutes and agency pages we found.
Example math (made-up numbers)
A four-unit building has a $600 monthly water and sewer bill in summer. The owner estimates that 15% of it is irrigation and the shared laundry room, based on comparing summer and winter bills.
| Owner pays common area | Common area in the split | |
|---|---|---|
| Common-area amount | 15% × $600 = $90 (owner) | $0 (in split) |
| Amount split among units | $510 | $600 |
| Equal-size unit’s share (25%) | $127.50 | $150.00 |
| Owner’s monthly cost | $90 | $0 |
| Owner’s yearly cost if every month were like this | $1,080 | $0 |
The $90 a month is the real cost of Option 1 in this example. Whether it is worth paying depends on your building, your tenants and your rent. In practice, irrigation usually varies by season, so the yearly figure for a real building would be lower if winter months have little or no irrigation.
Laundry rooms
A shared laundry room uses water, and sometimes gas or electric for dryers. If the machines are coin- or card-operated and you keep that revenue, many landlords treat the laundry’s utility use as an owner cost, since tenants already pay per load. Either way, decide how you will handle it before your first bill, and write it down.
Put the decision in writing
Whatever you choose, the lease should say which utilities are billed back, whether common-area use is included, and how any deduction is figured. Our post on adding a RUBS clause to your lease has an outline to take to your attorney.
Try your numbers
Use the RUBS calculator with the bill total after your common-area deduction to see each unit’s share, and the 4-unit recovery post to estimate what a bill-back might recover over a year.
MeterEase reads the bill total for you to confirm, applies your method and vacancy rule, and emails each tenant their share with the math shown 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.