RTA in Focus: Water usage charges

RTA in Focus: Water usage charges

25 March 2020

This article is part of the RTA in Focus series. With a raft of reforms to the residential tenancies framework set to start on 23 March 2020, we’re giving you the information you need to ensure you understand your obligations.

You can access all the articles in the RTA in Focus series here.

Water usage charges are only payable by the tenant when the premises is separately metered and certain water efficiency measures are in place.

Water. It’s a precious commodity. And it can be expensive – which explains why landlords are keen to pass usage charges on to their tenants whenever possible.

But, in the past, charging tenants for water usage has been anything but simple.

“The on-charging of water usage has been fraught with difficulty,” Sandra McGee, Rental Manager at Starr Partners Merrylands and member of the REINSW Property Management Chapter Committee, said.

“In the case of a single premises, it was straightforward. But sometimes there’s just one invoice that applies to two or more premises; for example, a main residence with the primary meter and a granny flat with a sub-meter. That’s when things became complex, because the property manager or the landlord had to attend the premises to read the meters.

“In some instances, the local council or water authority provides invoices for the separate premises, but in many other cases they don’t. It has always added an extra layer of complexity to our role as property managers.”

Property managers now have more clarity about when landlords can charge for water usage and when they can’t. Importantly, tenants now have more consistency when it comes to the payment of water usage charges.

What was required prior to 23 March 2020?

Section 39 of the Residential Tenancies Act 2010 (NSW) sets out the circumstances in which water usage charges are payable by the tenant. Specifically, that the premises must be “separately metered”. However, there was no guidance as to what “separately metered” actually means.

Charging tenants for water usage can pose problems.

There are many residential properties throughout New South Wales – including granny flats, villas and townhouses – with secondary water meters that have been installed to measure the water usage separately to that of the main residence, but they aren’t read by the water supply authority.

By way of example, consider the circumstance of a main residence with a granny flat, each leased to separate tenants. While the meter for the main residence is read and a bill is levied, the bill includes the combined water usage of both the main residence and the granny flat. There’s no separate invoice for the granny flat.

This has meant that the property manager had to physically attend the property, read both meters and then calculate the water usage applicable to each. Separate invoices had to then to be raised for both residences.

In short, the supplier’s bill could not be used for either property, as the reading from the main meter applied to water usage for both the main residence and the granny flat.

This was an unworkable situation, both in terms of the inconvenience of having to attend the property on a quarterly basis and the inaccuracy of on-charging, as the property manager’s meter reading was always out of sync with the supplier’s reading.

What’s changed?

On and from 23 March 2020, a new definition for “separately metered” has been added to section 3 of the Residential Tenancies Act. The new definition applies to section 39 and means that water can now only be charged to the tenant where a separate meter is installed measuring supply to the tenant’s premises and a separate bill is issued by the water supply authority.

In addition, in accordance with section 39, all of the following must be satisfied:

  • The premises must have compliant water efficiency measures installed (as prescribed by clause 10 of the Residential Tenancy Regulation 2019 (NSW))
  • The tenant must have received a copy of the part of the water supply authority’s bill setting out the charges or other evidence of the cost of water they have used
  • The tenant must have been given at least 21 days to pay the water usage charges
  • The landlord must have requested payment not later than three months after the issue of the water supply authority’s bill.

Clause 10 of the Residential Tenancies Regulation sets out that the following water efficiency measures that are necessary in a premises:

  • Shower heads with a maximum flow rate of nine litres per minute
  • Dual flush toilets with a minimum three-star rating (on and from 23 March 2025)
  • Cold water taps and single mixer taps for kitchen sinks and bathroom basins with a maximum flow rate of nine litres per minute.

Further, the premises must be checked and any leaking taps or toilets fixed at the start of the tenancy and when water efficiency measures are installed, repaired or upgraded.

The amendments in practice

Sandra said that REINSW worked with NSW Fair Trading to develop the definition of “separately metered”.

“The definition now addresses some of the issues property managers face when charging tenants for water and other utility charges,” she said. “Where there is no separate meter for an individual residence that is read by the water supply authority, how much can be charged?

“The amendment means that water will now only be able to be charged where there is a separate meter installed measuring supply to the tenant’s premises and a separate bill is issued by the water supply authority.

“Property managers may no longer be required to physically attend the premises to read the meter or calculate the correct amount payable from a single invoice issued for multiple premises.”

On its face, this is a real win in terms of day-to-day practice for property managers, but Sandra cautioned that there are still some practical issues that need to be navigated.

“Section 39(2) says we need to supply a copy of the water supply authority’s bill or ‘other evidence of the cost of water used by the tenant’,” she said. “However, the legislation provides no guidance as to what this ‘other evidence’ might be, so REINSW sought advice from NSW Fair Trading.”

NSW Fair Trading has advised REINSW that the definition of “separately metered” in section 3 must be read together with section 39. An important element of the new definition is that the meter must allow a separate bill to be issued by the supplier for the charges.

“This means that a landlord or [property manager] can only rely on a revenue meter installed at the rented property to be able to pass on water usage charges to the tenant, as this is the meter that is read by the water supply authority for billing purposes,” the advice set out.

The advice goes on to say that “relying on ‘other evidence’ to pass on water usage changes to the tenant under section 39(2) will likely conflict with the Act.”

“On the basis of this advice from NSW Fair Trading, property managers should only pass water usage charges on to tenants where a separate bill is issued by the water supply authority,” Sandra said.

When it comes to the water efficiency measures installed at the premises, Sandra urged property managers to closely monitor compliance.

“At the start of every residential tenancy agreement and whenever water efficiency measures are installed, repaired or upgraded, clause 10(d) of the Residential Tenancies Regulation requires that the premises are checked and any leaking taps or toilets are fixed,” she said.

REINSW has received advice from NSW Fair Trading that there is no requirement for the landlord to use a qualified plumber to check water efficiency measures for the purposes of clause 10(d). Rather, it’s up to the landlord or their property manager to determine how they will comply, so water usage charges are able to be passed on to the tenant. However, a qualified plumber is required if plumbing and/or drainage work is required.

Sandra noted this advice from NSW Fair Trading, but said that best practice is to have all water efficiency measures checked by a qualified plumber at the end of every lease to ensure they continue to be compliant.

“By doing this, you can be sure that everything is in working order and there are no impediments to passing on water usage charges to the tenant,” she said.

“In circumstances where a tenant has removed a water efficiency measure – for example, they’ve changed the shower head – the cost of repair can be charged to the tenant or may become part of any bond claim.”

In the case of installing dual flush toilets, Sandra advised property managers to start planning now.

“The deadline is 23 March2025, but don’t wait – start talking to your landlords today,” she said. “If a property under your management becomes vacant, have the new dual flush toilet installed as a priority. The last thing you want is to find yourself in a situation on 23 March 2025 where you have tenanted premises with a single toilet and you’re having to hire a ‘port-a-loo’ while the installation is completed.”

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