The California submetering law, set out in Civil Code sections 1954.201 through 1954.219, lets landlords of multi-unit residential properties bill tenants for water based on individual meter readings, but only under strict conditions: the per-unit rate cannot exceed what the water purveyor charges the master meter, bills must be itemized, tenants can demand the underlying billing data and receive it within seven days, and utility shutoffs over disputed charges are prohibited. The statute covers water, sewer, stormwater, and flood control charges, and it puts the compliance burden squarely on the property owner.
Which Rentals Are Covered
The law applies to residential rental properties with two or more dwelling units served by a single master water meter, where the landlord (or the landlord’s agent) owns and operates the submeters that measure each unit’s consumption.1California Legislative Information. California Code, Civil Code CIV 1954.202
It does not cover common interest developments such as HOA-governed condominiums, and it does not reach subletting arrangements between tenants. It also does not govern gas or electric submetering, which sit under separate regulatory frameworks. And it draws a firm line between submetering and ratio utility billing: ratio billing allocates the master bill by unit size or occupancy without measuring actual use, and the tenant protections described here apply only where consumption is actually metered.1California Legislative Information. California Code, Civil Code CIV 1954.202
What You Can Charge a Tenant
The rate rule is the anchor of the whole scheme. A landlord cannot charge a tenant a per-unit water rate higher than the rate the water purveyor charges the property on its master meter bill.2California Legislative Information. SB 7 Senate Bill – ENROLLED Submetering is a cost pass-through, not a revenue source. Any tiered pricing has to mirror the water purveyor’s structure rather than a schedule the landlord invents.
Bills must be itemized so tenants can see how the charge was built. That means the volumetric usage the submeter recorded, the rate applied to that usage, and any applicable tier. A monthly administrative fee to cover meter reading and billing is allowed, but it is capped and cannot function as a hidden surcharge.
Common Area Water
Because the master meter measures everything flowing into the property while the submeters only measure inside the units, there is always a gap: hallways, landscaping, laundry rooms, pools, and leaks in shared plumbing all show up on the master bill without showing up on any submeter. The statute handles this through disclosure. Landlords have to make available the total charges on the master meter bill and the number of dwelling units used in the billing calculation, which lets a tenant check that common-area water is being allocated openly rather than folded silently into their unit charge.2California Legislative Information. SB 7 Senate Bill – ENROLLED
Disclosures and the Seven-Day Request Rule
Tenants are entitled to information about the submetering system without having to fight for it. Landlords must tell tenants where their submeter is located, how the monthly bill is calculated, and when the submeter was last certified.2California Legislative Information. SB 7 Senate Bill – ENROLLED
The sharper obligation kicks in when a tenant asks for backup. On a written or electronic request, the landlord has seven days to produce:
- The most recent master meter bill, showing the property’s total water charges and any tiered pricing
- The number of units used in the billing calculation
- The per-unit volumetric charges
- The formula used to calculate the tenant’s individual bill
The landlord also has to disclose the date the submeter was last inspected, tested, and verified, and the next scheduled inspection date if one is known. If the information genuinely isn’t available, the landlord must say so rather than ignore the request.2California Legislative Information. SB 7 Senate Bill – ENROLLED
That seven-day window is where most disputes are won or lost. A tenant who sees a bill that seems too high can force the numbers into daylight, and a landlord who cannot produce them on time is out of compliance regardless of whether the underlying charge was correct.
Shutoffs Are Off the Table
Landlords cannot shut off water, electricity, heat, gas, or other utilities to force a tenant out or pressure them into paying a disputed bill.3California Department of Justice. Consumer Alert – Avoiding Water and Utility Shutoffs This applies whether or not the landlord thinks the tenant’s challenge has any merit. A submetering dispute has to be resolved through the billing process, not by cutting off service.
Keeping Submeters Certified
Submeters used for tenant billing have to be accurate enough for legal-for-trade measurement. The California Department of Food and Agriculture’s Division of Measurement Standards oversees certification and periodic testing of commercial measuring devices, and submeters fall under that authority. Meters drift over time, so a submeter that over-reads by even a small margin will produce complaints and, eventually, liability.
The practical requirement is a maintenance log per meter: install date, certification date, each inspection and test result, and the next inspection due. That log is what a landlord uses to answer a seven-day request. Installation itself should be done by licensed professionals in compliance with local building and plumbing codes, and landlords retrofitting older buildings should check with the local building department on permits.
Compliance Sits With the Landlord
Many owners hand submeter billing to a third-party billing agent. That’s allowed, but it doesn’t move the legal responsibility. The obligation to bill accurately, disclose transparently, honor the seven-day request rule, and keep the meters certified stays with the landlord no matter who prepares the paperwork.1California Legislative Information. California Code, Civil Code CIV 1954.202 Before signing with an agent, confirm that their standard practices meet every statutory requirement, because if they don’t, it is the property owner who answers for it.
Extra Rules for LIHTC Properties
Properties in the federal Low-Income Housing Tax Credit program have to clear an additional bar. Under IRS regulations, water paid through an actual-consumption submetering arrangement is treated as paid directly by the tenant rather than by or through the building owner, which affects the maximum allowable rent calculation under Section 42(g)(2) of the Internal Revenue Code.4Federal Register. Utility Allowances Submetering
To qualify, the landlord (or agent) has to purchase the utility from the local provider, bill tenants based on actual measured consumption, and charge no more than what the landlord pays. Bills must reflect real usage, not estimates or allocations.4Federal Register. Utility Allowances Submetering
The administrative fee is where LIHTC owners most often trip. The fee is excluded from gross rent only if the aggregate monthly amount stays at or below the greater of five dollars per month or an amount designated in an IRS bulletin.4Federal Register. Utility Allowances Submetering Going over that threshold can push a unit’s total housing cost above the applicable rent limit and jeopardize the property’s tax credit eligibility, so verify the current IRS figure before setting the fee.
How Water Reimbursements Are Taxed
Payments tenants make for submetered water are rental income to the landlord and have to be reported as such on the federal return.5Internal Revenue Service. Topic no. 414, Rental income and expenses The offsetting side is that the master meter bill the landlord pays is a deductible rental expense, so in most cases the two roughly cancel.6Internal Revenue Service. Publication 527 (2025), Residential Rental Property The reporting still has to happen; pocketing reimbursements without recording them is underreporting income.