Water bills in rental properties are one of those things that look straightforward until you actually dig into the rules – and then realise there are at least four conditions you need to meet before you can pass that cost on to your tenant.
If you’ve been billing your tenant without checking the fine print, you may have been doing it wrong. And if you haven’t been billing them at all, you might be missing out on a legitimate cost recovery that adds up over a tenancy.
Here’s what the rules actually say – and what they mean in practice.
Key Takeaways:
- You can only charge a tenant for water usage if the property is separately metered – strata properties almost always fail this test.
- Your property must meet water efficiency requirements before you can pass on usage charges – leaky taps and old showerheads are your problem, not theirs.
- The amount you charge cannot exceed what the water supplier actually charged you – you’re recovering a cost, not making a margin.
Table Of Contents:
Who Can Actually Charge for Water — and Who Can’t
The first thing to understand is that not every landlord is entitled to charge for water usage – and the type of property you own is the starting point.
If you own a house with its own water meter, you’re likely in a position to charge. If you own a townhouse, villa or apartment in a strata building, you almost certainly are not. Strata properties typically share water infrastructure, which means the property isn’t separately metered in the way the legislation requires, and individual usage charges to tenants generally can’t be applied.
The Four Conditions You Must Meet
Under NSW tenancy legislation, a landlord can only charge a tenant for water usage if all four of the following conditions are satisfied:
- The property is separately metered (or water is delivered by vehicle)
- The tenancy agreement states the tenant must pay for water usage
- The property has all water efficiency measures in place, and they have been in place for the entire billing period
- The amount charged is no more than what the water supplier actually billed the landlord
Miss any one of these, and the tenant is not liable for usage charges – even if you’ve already sent the invoice.
The billing period is also worth noting: it’s unlikely to align neatly with the tenancy start date, which is why the condition report should include a meter reading at the start of each tenancy. Without that, working out what usage belongs to which tenant becomes a problem.
The Water Efficiency Requirement: Why It Matters More Than You Think
This is the condition that most landlords underestimate — and it cuts both ways.
To charge your tenant for water usage, your property needs to meet NSW’s water efficiency standards. That means, at a minimum:
- All internal cold water taps and showerheads must have a WELS rating of 3 stars or above
- All toilets must be dual flush
- There must be no leaking taps or toilets on the property
If your property has an old showerhead, a dripping tap, or a single-flush toilet, you cannot charge your tenant for water until those issues are fixed – and the fix needs to have been in place for the entire billing period you’re trying to recover, not just the day before you send the bill.
The logic here is sound: it’s not reasonable to charge someone for water consumption if the fixtures in the property are inherently wasteful. If your showerhead uses 15 litres a minute, the tenant doesn’t have much say in how efficiently water moves through the fitting – you do.
Fix the fixtures first. Then charge.
What’s Fair – and What’s Not
The water efficiency requirement is about fairness to tenants. But there’s a flip side – fairness to landlords too.
Once your property is set up correctly, you shouldn’t be absorbing the cost of a tenant who runs the hose across the driveway every Saturday or showers twice a day for forty minutes. Water usage in a home is substantially driven by behaviour, and if the property is water-efficient by design, above-average consumption is a tenant matter, not a landlord matter.
This is exactly why the framework exists: efficient property, efficient accountability. The landlord takes responsibility for the infrastructure; the tenant takes responsibility for how they use it.
Some landlords never bother to set this up and just absorb water costs as a cost of ownership. That’s a choice – but over a 12-month tenancy, water bills can run into the hundreds of dollars. It’s worth recovering if you’re eligible to do so.
How to Set It Up Correctly
If you want to charge for water usage, here’s the practical sequence:
| Step | What to do |
| 1. Check your property type | Houses yes; strata units almost always no |
| 2. Check your meter | Confirm the property has its own water meter, separate from any shared supply |
| 3. Audit your fixtures | Replace any non-compliant taps, showerheads or toilets before the tenancy starts |
| 4. Fix any leaks | A single leaking tap can disqualify you from charging – get a plumber through |
| 5. Include it in the lease | The tenancy agreement must state the tenant is responsible for water usage charges |
| 6. Record the meter reading | Do this on day one of the tenancy and include it in the condition report |
| 7. Pass on the bill correctly | Only charge the usage component (not supply charges), and attach evidence of the actual supplier bill |
The supply charge – the fixed daily rate on your water bill – always remains your cost as the landlord. What you’re recovering is the usage component only.
Conclusion
Charging tenants for water is legitimate, but it comes with conditions that are non-negotiable. Get the property water-efficient, get the lease right, get the meter reading recorded, and you’re in a position to recover a genuine cost. Skip any of those steps and you’re not just missing out on the recovery – you may be issuing unlawful charges.
If you’re not sure whether your property qualifies or your current lease is set up correctly, it’s worth a conversation with your property manager before the next renewal. A small amount of admin upfront saves a much bigger headache later.At Preferental, we make sure the compliance side of your tenancy is handled properly from day one – so you’re never in a position where you’ve been doing it wrong without knowing. If you’d like us to review your current setup, get in touch.