Paying Utilities in Rental Properties
Understanding and balancing income and outgoing expenses is essential to successful property investment. This usually brings about the question on utilities and who is responsible for the respective payments.
In Western Australia, the circumstances that guide the responsibility of payment often fall into these two broad categories:
1. Where the Premises Is Separately Metered
If the tenant’s usage can be measured separately to that of the landlord’s, then the tenant is liable for all supply charges. The tenancy agreement should clearly define the areas of liabilities.
If the landlord lives at the same premises and a distinct charge cannot be clearly ascertained, then the landlord will be responsible for the entire charge.
2. Where there is an Agreement on the Allocation of Charges
Alternatively, the landlord and tenant may agree in writing to a defined method of calculating the tenant’s liability charges. The tenancy agreement also typically includes a section on this.
It is the landlord’s responsibility to ensure that the tenant receives a copy of the bill from the supplier and the tenant’s portion of charge (in writing) under the stipulated agreement. It is important to include these calculations as the tenant is not obliged to pay a utility bill unless there is written agreement about how the bill will be calculated.
On a side note, utilities paid by the landlord are also tax-deductible - the Australian Taxation Office governs legislation that allows landlords to claim an immediate deduction for costs like electricity and gas in the year the expense was incurred. However, if the tenant pays for the cost of electricity and gas, the landlord cannot claim this.
Here is a list of common utility bills and how they are treated.
1) Council rates
Residential tenants are not liable for paying council rates. Instead, this responsibility falls onto the shoulders of the Landlord. This applies to any agreement from 1 July 2013 onwards.
2) Water bills
Generally billed once every two months, water charges are usually broken down to:
Service charge (Rates) + Water Usage Charges
In general, whilst tenants pay for the usage or consumption of the water services, it is the landlord’s responsibility to pay for the water rates which is the service cost of providing clean water to the premises.
For more information on how this is calculated, please refer to:
Special Meter Reading
At the start and end of the tenancy, it is highly recommended that a special meter reading is taken. This should be recorded on the Property Condition Report or the Tenancy Agreement to ensure clarity should any concerns arise.
In the interest of up-keeping the external premises well, a common practice to encourage tenants to water lawn and gardens is to share the water usage cost for this purpose. The tenancy agreement should include what percentage of water consumption cost that the tenant may be required to pay.
Contact the Water Corporation on 13 13 85 for more information about meter readings.
3) Gas and Electricity
Similar to water charges, there are usually two portions in these bills which make up the total cost:
Service Cost (also known as Supply Cost) + Consumption
Unlike water charges, however, if the tenants receive the bill directly from the supplier, they are responsible for the full cost. However, if the tenant receives their electricity bill from the landlord instead, i.e. not directly from the electricity supplier, they cannot be charged any amount other than the consumption cost.
How to Serve Notice of Charges to Tenants
Written notice of utility charges must be given within 30 days of receiving the bill and this should include the following:
- the total charge for the tenant’s consumption of the utility; and
- if consumption at the premises is metered — the meter readings and the charge per metered unit; or
- if consumption at the premises is not metered — the charge calculated by the agreed method stipulated in writing by the prescribed tenancy agreement
- GST payable for the tenant’s portion of the service.
Where the lease ends within 30 days of the receipt of the utility bill, tenants should be provided with written notice of the charges as soon as practicable.
Unlike residential properties, commercial property tenants usually pay for most of these utility costs themselves. Please feel free to contact our Commercial Property Manager if you have questions in regards to Commercial Property Management.
For further frequently asked questions that you may have, we have provided an FAQ section for your convenience, on our website.