1685 Main Street, Room 202, Santa Monica, CA 90401  (310) 458-8751  www.smgov.net/rentcontrol
Owners Are Not Allowed to Pass Master-Metered
Utility Costs Directly Through to Tenants
Under the Rent Control Law, owners
may charge only a controlled rental amount.
But what about the cost of utilities? Can
these be passed along to tenants as a
surcharge on top of the rent?
Except in the case of individuallymetered units, the short answer is generally
“no.” The annual general adjustment is
intended to cover
increases in owners’
operating expenses,
including utility costs.
Therefore, an additional
utility “surcharge” is not
allowed. The law allows
only registration fees and certain,
specifically-identified taxes to be passed
through to tenants as a surcharge; it does
not allow a pass-through of an owner’s
utility costs.
Also, in 1985, 1986, 1991, and 2006
the Board approved utility adjustments for
qualified master-metered buildings. But
that was a Board-approved rent
adjustment, not a direct pass-through of
utility costs. It is never permissible for an
owner of a master-metered building to
simply pass on actual utility costs to
tenants.
What’s the difference between
master-metered and individuallymetered utilities?
There are several different ways that
utility use can be measured.

in which there is one utility meter
for an entire multi-unit building.
The utility company bills the owner,
and there are no meters measuring
utility usage by individual units.
Does this mean that tenants can never
be required to pay for utilities?
No, it doesn’t. Tenants may be
required to pay for their own utility
consumption if owner-paid utilities are
not a base amenity, the unit is
individually metered, and billing comes
directly from one of these companies:
Gas:
Southern California Gas
Water: City of Santa Monica Water Division
Electric: Southern California Electric
Master-metered buildings are those

Individually-metered buildings are
those in which each unit has its
own meter. The utility company
bills each unit separately.

Sub-metered buildings are master-
metered buildings in which the
owner has installed sub-meters on
the utility lines to individual units.
The utility company bills the owner
for the entire cost and the owner
telephone hours: M-Th 7:30 a.m. – 5:30 p.m., F 8:00 a.m. – 5:00 p.m.
public counter hours: M-F 8:00 a.m. – 4:30 p.m.
closed alternate Fridays
10/2015
uses the sub-meters to allocate the
cost for each unit.

RUBS is an acronym for “ratio utility
billing system.” It’s a system by
which an owner of a master-metered
building estimates each unit’s utility
cost by factors such as square
footage, number of tenants per unit,
or other factors, and passes on the
utility cost to individual units
accordingly.
Why can’t an owner of a mastermetered building just pass utility costs
through to the tenants?
Because doing so would result in the
tenant paying more than the maximum
allowable rent, which would violate the Rent
Control Law. Although the utility fee might
be treated by the landlord and tenant as
something other than “rent,” it would still be
excess rent as a matter of law.
That’s because Rent Control Regulation
8020(g) defines excess rent as “the
charging of any fee arising from the
landlord-tenant relationship or pertaining to
the continuing occupancy of a unit which is
in addition to the lawful rent . . . and which
is not authorized by law or a separate
agreement as defined in Regulation 3201.”
The pass through of master-metered utility
costs is not authorized by any law, is in
addition to the lawful rent, and is not
permitted as a separate agreement under
Regulation 3201.
Is it OK to pass through mastermetered utility costs if the owner
installs sub-meters for individual
units?
No. Although it’s true that sub-meters
might help an owner accurately determine
how much of a given utility is being used
by a given unit, the issue is not the passthrough’s accuracy, but the pass-through
itself. Even an accurately-calculated passthrough of master-metered utilities
remains a pass-through, which the law
forbids.
Is it OK to pass through mastermetered utility costs if the owner
uses a RUBS billing system?
No. This would still be a pass-through
of master-metered utilities, which is not
allowed. In addition, RUBS billing
formulas bear no relationship to actual
water usage.
What if the pass-through is done by
an outside company and not the
owner?
This would still result in an illegal
demand for excess rent, because the
tenant would be charged for something
above and beyond regular rent, and that
charge is not authorized by law and is not
a lawful separate agreement under
Regulation 3201.
An owner who overcharges for rent in
this way is liable to the tenant for
reimbursement of the excess.
telephone hours: M-Th 7:30 a.m. – 5:30 p.m., F 8:00 a.m. – 5:00 p.m.
public counter hours: M-F 8:00 a.m. – 4:30 p.m.
closed alternate Fridays
10/2015