What is a Shared Utilities Agreement?
A shared utilities agreement is a legal contract between a landlord and a tenant that can be incorporated into a residential lease agreement. This agreement specifies which utilities will be shared with another unit or common area within the building.
Why Include a Shared Utilities Agreement in a Residential Lease?
Some cities require landlords to disclose if utilities are being shared between multiple units. However, it is always a good idea to be as transparent as possible when it comes to utility payments. This helps build trust with tenants and prevent future miscommunication or liability issues. Landlords should:
- Specify which utilities are being shared
- Disclose the method for calculating utility charges
- Explain any additional service fees (if applicable)
Should Landlords Put a Cap on Utility Use?
Buildings with shared utilities arrangements may run into issues such as tenants overusing utilities. In these cases, landlords may decide to put a cap on certain utilities to prevent tenants from either overpaying or underpaying for services. For example, the utilities agreement could state that if the monthly bill exceeds a certain amount, the landlord will include any overage in the tenant’s next rent payment.
What to Include in a Shared Utilities Agreement
Landlords should include the following in a shared utilities agreement:
- Type of Agreement – The heading and opening should state that this is a shared utilities agreement.
- Lease Date – The date of the original lease should be included.
- Agreement Date – Landlords should include the date that the agreement is signed and goes into effect.
- Name and Address – The names and addresses of both the landlord and tenants should be included.
- Signature and Date – The agreement should be signed and dated by both the landlord and tenants.
- Landlord’s Disclosure – The landlord should disclose which utilities will be shared by multiple units
- Payment – The Landlord should include information on payment, including additional fees and when it is due.
It is important to note that certain areas prohibit the use of a shared metering system—meaning that tenants are not required to pay utility costs outside of their personal unit. Landlords should research local laws and regulations beforehand.
