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  








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            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
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          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  








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          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
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               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