Water usage charges on an investment property

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Q: We bought our first investment property at the end of last year, and we're a bit confused about water usage charges. My husband seems to think that all expenses relating to water usage can be passed on to the tenant, as it's a service like electricity - however, I thought water charges, like council rates, were the landlord's responsibility. Which one of us is right?

A: You could both be right, depending on which state your property is in!
In all states the actual amount charged for 'water rates' is payable by the landlord.  However, all states have a different rule when it comes to 'water usage'.
In Queensland, the owner pays water usage, although recent legislative changes (announced October 2007) allows for the landlords to pass on this charge as long as they have paid to have water savings devices installed.
In SA, Under Section 73 (2) of the Residential Tenancies Act 1995 (the Act), rates and charges for water supply can be passed on to the tenant. This also applies in Tasmania. Property managers/landlords and tenants should negotiate the amount for which the tenant will be liable for at the start of the tenancy and include this in the tenancy agreement. Currently, in the absence of an agreement, the landlord will bear the cost of water supply as well as the first 136 kilolitres per year, after which the tenant must pay the balance.
In Vic, in accordance with the Residential Tenancies Act 1997, when a tenant moves into a separately metered property, he/she is responsible for the water usage charges
In NSW, landlords pay for water usage, however under a proposal by the NSW government issued last September and as an incentive to save water, tenants who live in properties where water is separately metered will pay for their own water usage. Landlords will be encouraged to install water-saving devices such as showerheads. Sydney Water data shows that after these measures were introduced in public housing, water consumption has reduced by 29%.

In WA Tenancy agreements can vary on who pays for the water consumption. When preparing an agreement, it is recommended that the tenant and the landlord negotiate each party's contribution to the cost of water consumption. Although the tenant can be required to pay 100 per cent of water consumed, some landlords agree to offer a percentage of the bill to cover the cost of maintaining lawns and gardens.

As for who is right, I will have to leave that up to the two of you to establish!

Margaret Lomas is the founder of Destiny Financial Solutions, and is a qualified financial advisor and the author of five best-selling property investment books. She is the 2006 Telstra NSW Businesswoman of the Year. Visit: www.destiny.net.au

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