Every utility on a rental — electric, gas, water/sewer, trash, sometimes internet — needs an answer to one question: who pays? The answer shapes your NOI, your tenants' behavior, and your exposure to usage you don't control.
The default logic
Separately metered utilities should be in the tenant's name — full stop. It removes usage risk (tenants who pay for their own heat use less of it), removes billing hassle, and removes the nonpayment scenario where a departed tenant's final bill lands on you. Landlords typically retain what can't be split: common-area electric, and water/sewer and trash on master-metered multifamily. Owner-paid utilities on a small building commonly run 5–12% of gross rent — budget them explicitly.
When the building isn't separately metered
Options, roughly in order of preference: submeter (install per-unit meters — often $300–$1,000/unit — and bill actual usage where legal), RUBS (ratio utility billing — allocate the master bill by unit size or occupant count; legality and rules vary by state and city), or bake it into rent ("utilities included") at a premium that covers average usage plus a cushion. "Included" is simplest and rents well, but it invites consumption you fund — open windows in January are a real phenomenon.
Leases and transitions
Whatever the split, the lease must state it explicitly, utility by utility, including who holds each account and what happens on nonpayment. When converting an inherited "utilities included" building, change at natural lease boundaries with proper notice, and adjust rent honestly — tenants can do the math, and a conversion pitched as pure takeaway breeds turnover.
Worked example
A master-metered triplex includes water and heat; rents are $1,300/unit and the owner's utility bill averages $520/month (13% of gross). Submetering water and converting heat billing at renewal, with rents repriced to $1,240, shifts usage to the tenants: owner cost drops to about $140/month (common areas), tenants collectively pay for their actual usage, and total owner NOI improves by roughly $3,800/year — while the heaviest utility users, not the landlord, fund their own consumption.
When this rule of thumb breaks
Local law is decisive: some jurisdictions restrict RUBS, require landlords to retain water accounts, or make landlords liable for tenant utility arrears regardless of the lease — verify before restructuring. Market convention matters too: if every comparable listing includes heat, excluding it makes your unit look overpriced even when the math is identical. And in shared- system buildings (one boiler, one water heater) there may be no clean allocation — sometimes "included, priced accordingly" is genuinely the right answer.