Who's responsible for utility service? An age-old question, and one that frankly I think smart investors are starting to change.
Who is responsible for utility payments, including gas and water service?
The quick and short answer is that it all depends on your lease agreement. Whoever the rental agreement states shall pay the utility company is the one responsible for paying the utility provider for the service.
So what is normal in Chicagoland?
Do tenants pay for their water usage?
For the most part, in Chicago, the water and sewer bills are paid for by the landlords, and this is because of a few reasons:
The utility accounts for water in Chicago cannot be taken out of the owner's name. This means if you rely on your tenant to pay the water bills and they don’t, you can end up with major water charges that you will have to pay in order to get the water turned back on by the city. Additionally, since the bill cannot be transferred from the landlord's name, obtaining a copy for the tenant can be challenging. Furthermore, most multi-family properties are not individually metered, making it difficult to track a tenant's water usage.
Do tenants often pay for gas?
Generally speaking in Chicago it is normal for a tenant to pay for their gas in an apartment when there is a separate meter for their account; however, some apartments do not have individual water heaters or individual heaters in each unit, and thus have one bill for the entire building, and it is common for landlords to cover the natural gas usage for the hot water and boiler system in the building.
Do tenants in Chicago often pay for their electricity?
Most properties have individual electric meters for each unit; however, a unit's utilities can be tied into the common area. This is common when a two-flat is converted to a three-unit building or a single-family home is turned into a two-unit building. When a tenant's rental units are tied into common area electric meters, you, as a property manager, cannot legally have them pay the full electric bill.
What about things like insurance and property tax?
So for commercial properties in Chicago, it is common to have the tenants pay their portion of these bills; however, for an apartment complex or single-family home, this is not a common practice.
Why is this going to start to change in the coming years?
Best practices are often passed down from one investor to another, and often from a competition stand point, if everyone on the block has free heat and free water, it is hard to charge for these things and stay competitive. With that being said, more and more we are seeing businesses outside of real estate uncouple costs. For example, take Southwest Airlines, who recently stopped including bags and seat selection and started charging for both. So what is changing that makes me think rental property owners will begin to charge tenants for the utility costs?
1. By charging utility costs to tenants, you can offer a lower rent price, which can attract more tenants to your listing.
2. Landlords are taking a political beating in the media for raising prices on tenants when in reality the prices go up because the prices for public services, property tax, and insurance are forcing the landlord to raise the price, by breaking this out, you avoid not only losing money if the amount of water used by your tenants runs high, but also the being labeled a slum lord that raises prices unfairly on tenants.
3. State laws in Illinois and Chicago allow you to use Ratio Utility Billing System, or RUBS, if done correctly. This will enable you to charge tenants for utility services such as garbage service, water, and sewer charges, even though there are no separate meters. The only utility for which this cannot be done in Illinois is electric, as you must have separate electric meters to charge a tenant for the usage in their rental units.
The only negative to charging separate charges for utility services in Chicago is that a Chicago property management company cannot put the water bills or common area bills in the tenants' names, which means that it is up to the landlord to pay the bill and then recoup the costs from the tenant.
So, how are top Chicagoland property management companies like Chicago Style Management adapting? We are looking to help our landlords increase the predictability of their profits, so we will be launching the RUBS service for our clients at the beginning of 2026. This means if you are a landlord in Chicago or the south suburbs of Chicago, you can use Chicago Style Management's property management services to help pass the costs of your water utilities, garbage services, natural gas if you have boiler heat, sewer services, and trash services, as well as things like landscaping and snow removal. Using RUBS is the best way to be able to create a better monthly budget for your multifamily property and peace of mind that if a tenant cranks up the heat or takes two-hour-long showers, you won't be stuck with an overpriced bill.
While we are not yet offering a service to have tenants pay for the property tax or insurance bills, if we continue to see huge increases in those bills, I think it may be beneficial at some point to look at lowering the monthly rent of a tenant and then charging them for property tax as well as insurance, this will allow property owners to not always look like the bad guys when it comes to raising rent and put the onus back on the politicians who use landlords as a scapegoat to get votes.
Are you a landlord paying for garbage collection, the cost of water, and other utilities that you think your tenants should be paying for? Get on our RUBS presale list before the end of the year to save on the service as we change your building from owner-paid utilities to tenant-paid utilities and see your profits rise.
