To prevent misunderstandings between landlords and tenants, a lease or rental agreement should include a detailed clause that makes it clear who is responsible for paying for utility services.
Consider what utilities currently serve the rental, as well as what utilities could potentially be provided. At the minimum, you'll want to make sure that your lease or rental agreement addresses payment of the following utilities:
The lease or rental agreement can list each utility and the party responsible for payment. More often, though, a lease or rental agreement will specifically mention only the utilities that the landlord will pay for, and state that the tenant is responsible for arranging and paying for all other utilities. (See Nolo's Residential Lease form as an example.) Either way is perfectly legal and acceptable.
When local rules require use of a certain utility provider, or when the landlord wants the tenant to use a certain provider, the lease or rental agreement should make this requirement very clear, and should list the name and contact information of the required provider to avoid any confusion.
It's not unusual for landlords pay for the utilities that are related to the upkeep of the rental or that are impossible to fairly allocate among tenants. For example, a landlord who wants to make sure that the grass at the property stays green might agree to pay for water, or a landlord who rents a backyard cottage that is on the same utility bill as the main house might agree to pay for electricity.
Local practices might dictate who pays for what. For example, many towns require homeowners to utilize a certain waste service provider, and landlords in these towns are likely more inclined to pay for garbage service to ensure compliance with the local rules (and to make sure that tenants don't allow waste to build up at the rental).
Some landlords make it a policy to provide essential utilities—such as water, gas, and electricity—as part of the rent, and require the tenant to pay for any additional utilities. Other landlords—especially those who rent out single-family residences—require tenants to pay for all utilities.
Landlords should also consider the following when deciding how to allocate responsibility for utility payments in their rentals.
Having tenants pay for their water usage has become a popular way for landlords to recoup their water costs. The best method is to have the water company install meters for each unit, so that each household pays the utility directly. This is usually feasible in new construction, but not practical as a retrofit. As an alternative, some landlords contract with a submetering company to install submeters, which transmit a rental unit's water usage directly to the company via digital signals; the company bills each household directly, and the landlord pays an administrative fee for the submetering service. Be sure to do your homework before arranging for water submetering, because some states disallow this altogether. Start by checking with the water company that serves your rental property.
Ideally, there should be separate gas and electric meters for each rental unit. If that's not the case, or if a tenant's meter measures gas or electricity used in areas outside of the tenant's rental units (such as a water heater that serves several apartments or lighting in a common area), you should disclose this in your lease or rental agreement. Some states require this type of disclosure. For example, state law in California requires landlords to notify all prospective tenants, before they move in, if their gas or electric meter serves any area outside of their dwelling. (Cal. Civ. Code § 1940.9 (2021).)
The best solution is to put in a separate meter for areas served outside a tenant's rental unit. If you don't do that, you should pay for utilities for the tenant's meter yourself by placing that utility in your name.
Because utility payments can add hundreds of dollars per month to the tenant's budget, whether or not certain utilities are included with the rent is vitally important to most tenants. To avoid ambiguity and to weed out potential applicants who cannot afford the base rent plus the cost of utilities, landlords should note what's included (and what's not) in any advertisements for the rental.
Ultimately, because there are no rules saying, for example, that landlords must pay for water and tenants must pay for Internet, landlords and tenants are free to negotiate the matter.