Who Pays Utilities in a Rental: Lease Clauses, Submetering and Shutoff Risks

Few lease terms cause more arguments than utilities. A tenant assumes water is included, a landlord assumes it is not, the account stays in the wrong name, and a month later someone is without power or facing a bill nobody budgeted for. Deciding who pays utilities in a rental is simple in principle. Putting it in writing, billing it fairly and keeping the lights on between tenants is where small landlords get into trouble.

This guide covers landlord-paid versus tenant-paid utilities, how to word the lease clause, a high-level look at ratio billing and submetering, how to protect a vacant unit, and why you should never shut off a tenant's utilities to force a result. It is part of our rental management guides for independent landlords and small property managers.

Note: This article is general education, not legal advice. Utility billing, shutoff and landlord-tenant rules vary by state and municipality and change over time. Consult a local attorney before adopting a billing method or taking any action that affects a tenant's services.

Landlord-paid versus tenant-paid utilities

There is no single national rule for who pays utilities in a rental property. The lease decides, subject to local law. In practice, most arrangements fall into one of three patterns:

• Tenant pays directly. The tenant opens accounts in their own name for electricity, gas, internet and often water. This is common in single-family rentals and in buildings where each unit has its own meter.
• Landlord pays and includes it in rent. The landlord keeps the accounts and builds the cost into the rent. This is common for water, sewer and trash in small multifamily buildings with one shared meter.
• Landlord pays and bills back. The landlord keeps the account and charges tenants for their share through a separate line item, usually based on a submeter or a formula.

Which one fits depends on how the property is metered. A house or a unit with its own meter is easy to put in the tenant's name. A duplex or small building with one meter for several units forces a choice: absorb the cost, raise rent, or allocate the bill, each with its own legal and practical limits.

Whatever you choose, state it clearly and apply it the same way across similar units.

Writing the utilities clause in your lease

Most utility disputes trace back to a vague clause such as "tenant pays utilities." A good clause answers specific questions. Cover each of these in the lease or a utilities addendum:

1. Which utilities, by name. List electricity, gas, water, sewer, trash, internet and any other service, and mark each as landlord-paid or tenant-paid.
2. Whose name is on the account. If the tenant opens the account, say by what date, and require proof of service at move-in.
3. What happens if the tenant does not set up service. Spell out your right to require it, and whether you may place the account in your name and bill the cost back, where local law allows.
4. How bill-backs are calculated. If you charge for water, sewer or trash, state the method, how often you bill, and when payment is due.
5. Caps or included amounts. If a utility is included up to a certain amount, state the amount and how overages are billed.
6. Interruptions and repairs. State that service may be interrupted for repairs or emergencies, and that the tenant must not tamper with meters.
7. Move-out. Require the tenant to keep service on through the end of the tenancy and close accounts only after you confirm move-out.

Have a local attorney review any wording you adopt. For how addenda fit with a lease, see our overview of lease addendum types landlords use and when to add them.

RUBS and submetering: a high-level look

When several units share one meter, landlords sometimes divide the bill among tenants. There are two common ways to do it.

• Submetering. A separate meter measures each unit's actual use, and the tenant is billed for what that meter records.
• Ratio utility billing, often called RUBS. The landlord divides the master bill among units using a formula, such as number of occupants, bedrooms or square footage, because no individual meter exists.

Submetering ties the charge to real use, which tenants usually find easier to accept. Ratio billing is simpler to set up but easier to dispute.

State rules vary widely

Be cautious here. Some states regulate these billing methods closely, some limit them to certain utilities, and some leave them largely to the lease. Texas is one example of detailed regulation. Under the Public Utility Commission of Texas rule at 16 Texas Administrative Code section 24.281, owners may pass through only the water and wastewater charges, may not pass through fees the utility charges the owner, such as deposit, disconnection, reconnection or late payment fees, and may add a service charge to submetered bills of up to 9 percent. For allocated billing, owners must first deduct base charges and a share for common areas before splitting the bill. Many other states have different rules or none at all, and some cities add their own.

Before you bill tenants for any shared utility, confirm four things for your location:

• Whether the billing method is allowed for your property type.
• What must be disclosed in the lease, and when.
• Whether the amount you can recover or the fees you can add are capped.
• What records you must keep and whether tenants can request them.

Also weigh the cost of billing against the benefit, since a few dollars a month per unit may create more disputes than it saves.

Keeping utilities on between tenants

The gap between tenants is where utility mistakes get expensive. When a tenant closes their accounts on move-out day, service can lapse with no one in charge, and that is when pipes freeze or a showing happens in the dark.

Plan for the vacancy before the tenant leaves:

• Move key accounts to your name on the move-out date. Schedule the transfer in advance so there is no lapse, and confirm each utility has a landlord account ready.
• Keep electricity, water and, in cold climates, heat on. You need power for cleaning, repairs and showings, and heat to protect plumbing in winter.
• Record the meter readings. Take photos of each meter on move-out and move-in days so the final bill and the next tenant's first bill start at the right number.
• Check your insurance. RentalRealEstate.com reports that standard landlord policies often exclude key protections once a property sits empty for 30 to 60 days, and that vacancy is commonly defined as no one residing in the unit and utilities remaining off. Ask your insurer how it defines vacancy, and read our guide to the insurance coverages landlords actually need and how to choose limits.
• Shorten the gap. A faster turnover means less time paying for an empty unit. Our step-by-step tenant turnover checklist to cut vacancy days and protect your property covers the sequence.

If a departing tenant leaves a utility balance, check your lease and local law before charging it against the deposit. Some states restrict what a deposit can cover, and a bill you cannot document is hard to defend.

Why you should never shut off a tenant's utilities

When a tenant stops paying, cutting the power or water can feel like fast pressure, but it is one of the most expensive mistakes a landlord can make. In most states, interrupting a tenant's utilities to force them out or force a payment is treated as an illegal self-help eviction, and the tenant can recover damages.

A few examples show how seriously states treat it:

• California. Civil Code section 789.3 says a landlord may not, with intent to terminate the tenant's occupancy, willfully cause the interruption of utility service furnished to the tenant, including water, heat, light, electricity and gas, whether or not the service is under the landlord's control. The statute also provides for actual damages and daily statutory damages, so confirm the current amounts before you rely on them.
• New York. The state Attorney General's guidance explains that under Real Property Actions and Proceedings Law section 768, interrupting essential services such as heat, water or electricity is an unlawful eviction method. A violation is a class A misdemeanor, and owners face civil penalties of $1,000 to $10,000 per violation, plus up to $100 per day.
• Texas. Property Code section 92.008 bars a landlord from interrupting utility service the tenant pays for directly, or water, wastewater, gas or electric service the landlord furnishes, except for bona fide repairs, construction or emergencies, and except in limited submetered electric situations. The tenant may recover possession or end the lease, and recover actual damages, one month's rent plus $1,000, attorney's fees and court costs.

Other states have similar laws, and some include criminal penalties. The safe rule: while the tenant is in the unit, keep the services you are responsible for running, and use the court process for nonpayment. Our guides on how to evict a tenant legally with a step-by-step process and the landlord-tenant laws by state that every landlord must know explain the legal route.

If a utility is in your name and the tenant owes you for it, pursue the money as a bill-back or claim and do not cancel the service. Legitimate interruptions for repairs or emergencies should be as short as possible, announced in advance where you can, and documented.

Documenting who pays what

Utility disputes are almost always disputes about proof. Keep a simple record for every property:

• The signed lease and utilities addendum showing who pays each service.
• Proof that the tenant opened each account, or your own account confirmations.
• Meter photos with dates at move-in and move-out.
• The bills you pay and the bill-back charges you send, with the calculation.

Keep these records for the full tenancy and long enough afterward to cover a deposit dispute, and check your state's retention rules.

A worked example

A landlord owns a four-unit building with one water meter and a $400 monthly water and sewer bill. After confirming that allocated billing is allowed locally, the landlord splits the bill by occupant count, attaches the formula to a signed lease addendum, and bills each tenant monthly. When one tenant stops paying the water charge, the landlord keeps the water on, sends a written reminder, and treats the balance like any other unpaid charge. Between tenants, the landlord moves the electric and water accounts into their own name on the move-out date, photographs the meters, and keeps the heat on until the next tenant moves in.

Frequently asked questions

Who pays utilities in a rental, the landlord or the tenant?

Whoever the lease says, within local law. Tenants often pay electricity and gas directly, while landlords often cover water, sewer and trash in buildings with shared meters. Put it in writing for each utility.

Can a landlord charge tenants for water in a shared-meter building?

Often yes, but only where state and local rules allow it and the lease discloses the method. Some states regulate submetering and ratio billing closely, so confirm local rules first.

Can a landlord shut off utilities if a tenant does not pay rent?

No, in most states. Interrupting a tenant's utilities to force payment or force them out is generally treated as an illegal self-help eviction, with possible damages, penalties and criminal charges. Use the court process instead.

Should utilities stay on when a rental is vacant?

Generally yes. Power and water support cleaning, repairs and showings, and heat protects pipes in cold weather. Many insurance policies also limit coverage when a unit is vacant with utilities off, so ask your insurer.

What is the difference between RUBS and submetering?

Submetering bills each unit for its own measured use. Ratio utility billing divides a shared bill by a formula such as occupants or square footage. Both are regulated differently from state to state.

What to do next

Utility problems rarely start with the bill. They start when the lease is unclear, the accounts are in the wrong name, nobody records the meters, and a tenant and a landlord remember the arrangement differently. Small landlords usually manage this from text messages and memory, which makes every disagreement harder to resolve.

Shuk helps keep the record in one place. Landlords can send renters a payment request tied to the lease for charges such as a utility overage, and water and sewer can stay in the landlord's name and be billed back to renters through Shuk while other utilities transfer on move-in day. Property Documents holds the signed lease, utilities addendum and account confirmations inside each property, and unlimited Adobe-powered e-signatures let you send an addendum to every tenant. The Inspection Tool captures move-in and move-out condition with photos, videos and notes, and centralized in-app messaging keeps outage and billing conversations in one thread.

At as low as $2 per unit per month, with no setup fees and no contract, and with White Glove Onboarding included at no additional cost, Shuk makes a documented, consistent utilities process feasible for landlords and property managers up to 200 units.

Book a demo at shukrentals.com/book-a-demo to see how payment requests, Property Documents, e-signatures, the Inspection Tool and in-app messaging work together so every utility arrangement is written down, billed clearly and easy to prove.