California Shared Utility Disclosure

California Shared Utility Disclosure Guide

California Utility Law Requirements

California law regulates how landlords can charge tenants for utilities:

When Separately Metered:

• Tenant pays utility company directly
• Most common and straightforward arrangement
• No special disclosure needed (just note in lease)

When NOT Separately Metered (Shared):

• Landlord must disclose allocation method BEFORE lease signing
• Must provide reasonable allocation method
• Cannot charge more than actual utility cost
• Must provide documentation upon request

What is a “Shared Utility”?

A shared utility exists when:

• Single utility meter serves multiple units
• Utility is in landlord’s name but tenant must pay
• No individual meter for tenant’s unit
• Common areas share meter with residential units

Common examples:

• Old buildings with one water meter for entire building
• Duplexes with shared gas meter
• Apartments where electricity includes common areas
• Properties with shared well or septic

Legal Requirements for Shared Utilities

Disclosure Requirements:

• Must disclose which utilities are shared
• Must explain allocation method in writing
• Must provide estimate of typical costs
• Must disclose BEFORE tenant signs lease

Billing Requirements:

• Can only charge actual utility costs (no markup)
• Must use reasonable allocation method
• Must provide copies of utility bills upon request
• Must provide itemized breakdown of charges

What Landlords CANNOT Do:

• ❌ Mark up utility costs for profit
• ❌ Charge “administrative fees” for billing
• ❌ Use arbitrary or unfair allocation methods
• ❌ Refuse to provide documentation of actual costs
• ❌ Change allocation method without notice

Acceptable Allocation Methods

1. Equal Division

• Total bill ÷ number of units = each tenant’s share
• Simplest method
• Works best when units are similar size
• Example: 4 units, $200 water bill = $50 per unit

2. Based on Occupants

• Weighted by number of people in each unit
• More occupants = higher share
• Fair for water/sewer costs
• Example: Unit A (2 people), Unit B (4 people) = 2:4 ratio

3. Based on Square Footage

• Larger units pay proportionally more
• Fair for heating/cooling costs
• Example: 1000 sq ft unit vs 500 sq ft unit = 2:1 ratio

4. Based on Bedrooms

• More bedrooms = higher share
• Proxy for occupancy and space
• Example: 3-bed pays 1.5x more than 2-bed

5. Based on Rent Ratio

• Tenant’s rent as % of total rent = utility share %
• Reflects unit value/size
• Example: Pays 30% of total rent = pays 30% of utility bill

6. Estimated/Fixed Amount

• Landlord estimates average monthly cost
• Tenant pays fixed amount each month
• Landlord absorbs fluctuations
• Must be based on actual historical costs
• Cannot exceed actual average costs

Documentation Requirements

Landlord must keep and provide:

• Copies of all utility bills
• Calculation showing how tenant’s share was determined
• Records of all payments received
• Historical usage data (for estimates)

Tenant rights:

• Can request copies of utility bills
• Can request breakdown of charges
• Can audit landlord’s calculations
• Can dispute unreasonable charges

Common Problems & Solutions

Problem: One tenant wastes utilities

• Solution: Include conservation clause in lease
• Consider installing sub-meters (tenant pays for installation)
• Can be grounds for lease violation if excessive

Problem: Utilities include common areas

• Solution: Deduct reasonable estimate for common area usage before dividing
• Be transparent about calculation
• Example: $200 bill – $40 common area = $160 divided among units

Problem: Seasonal variation

• Solution: Use fixed amount based on yearly average
• OR bill actual amount each month with explanation
• Educate tenant about seasonal changes upfront

Problem: Tenant disputes charges

• Solution: Provide full documentation immediately
• Show utility bill, calculation, allocation method
• Be willing to discuss and explain
• Correct errors promptly

Submetering

What is submetering?

• Installing individual meters for each unit
• Allows precise measurement of each tenant’s usage
• Most fair method for shared utilities

Submetering rules:

• Must be approved by utility company
• Must meet local codes
• Landlord can charge for installation (spread over time)
• Must still use utility company’s rates (no markup)
• Popular for water in multi-unit buildings

Costs:

• Water submeters: $500-$1,500 per unit installed
• Electric submeters: $1,000-$3,000 per unit
• May require approval from utility company and city

Special Situations

Master-Metered Properties:

• One meter for entire building
• Landlord gets commercial rate (usually cheaper)
• Must pass savings to tenants (can’t charge residential rate)
• Should use actual commercial rate in calculations

Rent Control Cities:

• May have stricter utility charging rules
• Los Angeles, San Francisco have specific requirements
• May limit how utilities can be passed through
• Always check local ordinances

Section 8/Subsidized Housing:

• Special rules may apply
• Utility allowances already factored into rent
• Check with housing authority before charging separately

Tenant Remedies for Improper Utility Charges

If landlord overcharges or improperly bills utilities:

• Request documentation and explanation
• Withhold disputed amount (with proper notice)
• File complaint with local tenant protection agency
• Sue in small claims court for overcharges
• Report to Public Utilities Commission (if applicable)

Best Practices

For Landlords:

• ✅ Disclose utility arrangement before lease signing
• ✅ Use fair, reasonable allocation method
• ✅ Provide historical usage data to prospective tenants
• ✅ Give itemized breakdown with each bill
• ✅ Keep all utility bills for at least 3 years
• ✅ Never mark up utility costs
• ✅ Respond promptly to questions and disputes
• ✅ Consider installing submeters in new properties

For Tenants:

• ✅ Ask for utility arrangement in writing before signing
• ✅ Request historical usage/cost data
• ✅ Review monthly bills carefully
• ✅ Request documentation if charges seem high
• ✅ Conserve utilities (benefits everyone)
• ✅ Report leaks or waste immediately
• ✅ Communicate with other tenants about usage

Sample Calculations

Example 1: Equal Division

• 4-unit building, $240 water bill
• $240 ÷ 4 = $60 per unit

Example 2: Square Footage

• Unit A: 1000 sq ft, Unit B: 750 sq ft, Total: 1750 sq ft
• $200 gas bill
• Unit A: (1000/1750) × $200 = $114.29
• Unit B: (750/1750) × $200 = $85.71

Example 3: Occupancy

• Unit A: 2 people, Unit B: 4 people, Unit C: 1 person, Total: 7 people
• $210 water bill
• Unit A: (2/7) × $210 = $60
• Unit B: (4/7) × $210 = $120
• Unit C: (1/7) × $210 = $30

Resources

• California Public Utilities Commission: www.cpuc.ca.gov
• Local utility companies (for submetering info)
• California Apartment Association: caanet.org
• Local rent control board (if applicable)
• State and local habitability requirements