BILL ANALYSIS SB 2127 Page 1 Date of Hearing: June 20, 2000 ASSEMBLY COMMITTEE ON JUDICIARY Sheila James Kuehl, Chair SB 2127 (Bowen) - As Amended: June 15, 2000 SUBJECT : LANDLORD TENANT: DISCLOSURE; CHARGES FOR WATER AND SEWER SERVICES KEY ISSUES : 1)SHOULD A LANDLORD WHO ALLOCATES WATER AND SEWER CHARGES IN ADDITION TO THE MONTHLY RENT FOR EACH TENANT'S UNIT, BUT WHO DOES NOT PROVIDE A SEPARATE METER FOR EACH UNIT, BE REQUIRED TO NOTIFY TENANTS OF THIS ADDITIONAL CHARGE? 2)SHOULD SUCH A LANDLORD, IN A MONTH-TO-MONTH TENANCY, BE REQUIRED TO PROVIDE 60 DAYS NOTICE BEFORE ASSESSING NEW OR INCREASED WATER AND SEWER CHARGES OR ALTERING ANY PREVIOUSLY AGREED-TO BILLING ARRANGEMENTS REGARDING THOSE CHARGES? SUMMARY : Seeks to inform current and prospective tenants about separate charges for water and sewer services. Specifically, this bill : 1)Requires landlords who allocate water and sewer charges in addition to the monthly rent for each tenant's dwelling unit, but who do not provide a separate meter for each unit, to do the following: a) Prior to the inception of any tenancy, the landlord must explicitly disclose any separate water and sewer billing arrangements in the lease or rental agreement; b) If a specific rental rate is advertised, the landlord must disclose, in the advertisement, any separate water and sewer billing arrangements; and c) In any month-to-month tenancy, the landlord must give written notice at least 60 days prior to assessing new or increased water and sewer charges or altering any previously agreed-to billing arrangements regarding water and sewer charges. 2)Does not apply to any units subject to local rent control or SB 2127 Page 2 stabilization laws, statutes, ordinances or regulations. 3)Contains language stating that it is the intent of the Legislature not to condone the practice by apartment owners of billing tenants for water service without providing separate metering for the individual apartments. EXISTING LAW : 1)Permits a landlord to assess separate charges for gas and electric services, but requires the landlord to make specified disclosures and arrangements if the landlord does not provide separate gas and electric meters for each tenant's dwelling which measures the electric or gas service to that specific dwelling unit. (Civil Code section 1940.9.) 2)Provides that, in general, residential tenancies are either for a periodic term, such as a month-to-month tenancy pursuant to a rental agreement, or for a fixed term, such a one-year lease agreement. In month-to-month tenancies, any term of the tenancy may be changed on written notice of at least 30 days. (Civil Code section 827.) In lease agreements, the terms of the lease are fixed at the time of the agreement, and may be changed upon pursuant to its terms or upon mutual agreement of the parties. FISCAL EFFECT : The bill as currently in print is not keyed fiscal. COMMENTS : According to the author, many older apartment complexes (pre-1980) have only one water and sewer meter for the entire building. Traditionally, landlords of these buildings have included the costs of these utilities in the rents charged for a unit in the building. According to the author, landlords of newer buildings with individually metered units, on the other hand, use that feature to offer lower rents. Instead of bundling the water and sewer charges with the rent into one price, the landlord offers an "unbundled" lower rent that does not include the separate water and sewer charges. The author asserts that this has resulted in a situation where landlords of older buildings with single meters charge tenants water and sewer costs based on a SB 2127 Page 3 percentage of the landlord's water and sewer bill, rather than actual usage. The author states: Now, in an effort to keep up with newer buildings that have individually metered units and can offer lower rents, some 'single meter' landlords are trying to spread out their water and sewer costs by breaking these charges out separately from the total rent and assigning a percentage of the bill to each tenant, or by charging a flat fee. The landlord then 'bills' the tenant on a periodic basis and the tenant pays the landlord directly for these services. The problem is without separate billing meters, landlords dividing these costs up have no way of knowing what each tenant's exact usage is - so they are estimating or creating a formula based on the number of people in each unit, square footage of units etc. Consumers in this situation have no idea if they are being overcharged for water. Granted, that sort of happens today when water is rolled into a rental charge, but it's more egregious under this system because: 1) it varies from month to month instead of being built into the same monthly rental fee; and 2) the variation is based on the usage of the entire complex, not just the individual tenant. ? Billing is calculated using a number of techniques, but the bottom line is tenants aren't charged on the basis of what they use, but on a percentage of the landlord's bill. The charge varies from month to month depending on the actual usage of water by the entire apartment complex, not of the individual tenant. So a tenant who trues to conserve water could actually see his/her bill go up if fellow tenants don't conserve water as well. ? A flat fee, as part of rent - or even separate from rent - is easy for a tenant to understand and makes monthly bills predictable. But to apportion a bill based on the monthly usage of the entire complex is unpredictable and patently unfair to the tenant. The author notes that tenant complaints about these water and sewer charges are currently being addressed by the California Public Utilities Commission (PUC), which is expected to issue a decision on the lawfulness of the practice this summer. The bill thus contains language noting that the PUC is currently SB 2127 Page 4 investigating whether apartment owners may lawfully bill tenants for water service without providing separate metering for the individual apartments. ARGUMENTS IN SUPPORT : Both the Western Center on Law and Poverty and the California Rural Legal Assistance Foundation support the bill, stating: Tenants - many of whom live on limited incomes - need to be aware of the 'true' monthly rent before traveling to the rental to inspect it. A rental advertisement could significantly understate the monthly charges if the water and sewer charges were excluded. This omission could make price comparisons difficult, and, at a minimum, could result in frustration after a long bus or car trip when the tenant discovered that these charges were not included in the rent. The monthly rental rate could in fact be much higher than the advertisement revealed. We support your effort with SB 2127 to ensure that tenants are made aware of this new procedure of separate charges. In support of the bill, the Los Angeles Housing Law Project notes that it "does not support the billing by landlords of separate utility charges. However, if landlords are going to be allowed to bill for utilities tenants should be informed in advance of the practice. SB 2127 will ensure that tenants [know] at the outset of a lease that [they] will be incurring utility charges." ARGUMENTS IN OPPOSITION : The California Apartment Association (CAA) opposes the bill, arguing that recent amendments providing that it is the intent of the Legislature not to condone the practice by apartment owners of billing tenants for water service without providing separate metering for the individual apartments has left its members "very uncomfortable." CAA asserts that it believes that the intent language is not neutral as written, stating that: There is no equilibrium in the statement that the Legislature does not "condone" the practice by apartment owners of "billing tenants for water service without providing separate metering for the individual apartments." A more equitable approach would be to include language that indicates the Legislature does not condone "or prohibit" this practice. We also SB 2127 Page 5 propose that you strike the language included on page 3 at line 13 through 15, which reads "(c) Nothing in this section authorizes apartment owners to bill tenants for water without providing separate metering for the individual apartments." REGISTERED SUPPORT / OPPOSITION : Support California Rural Legal Assistance Foundation Los Angeles Housing Law Project Tenderloin Housing Clinic Western Center on Law and Poverty Opposition California Apartment Association Analysis Prepared by : Saskia I. Kim / JUD. / (916) 319-2334