Owners and managers of rent-stabilized apartments in New York City must exercise care when charging tenants for utilities, particularly with regard to water usage. While methods like submetering or ratio-based billing formulas may be legally viable for market-rate tenants under certain conditions, they are not permissible for rent-regulated units.

Water, both hot and cold, is classified as a required service under the Rent Stabilization Code §2520.6(r). Required services must be provided as part of the legal regulated rent. In other words, the cost of water service must be bundled into the rent and not charged separately. The law treats water the same way it treats heat or something the owner is obligated to provide at no extra cost to tenants in regulated units.

This holds true regardless of whether the tenant has signed a lease rider agreeing to pay for water usage or whether the building has adopted an allocation method such as the Ratio Utility Billing System (RUBS). Attempts to pass water charges onto rent-stabilized tenants through these methods have repeatedly been found to violate rent regulation.

Understanding RUBS and Its Legal Limitations

In New York City, RUBS, or Ratio Utility Billing System, is a method some owners use to distribute utility costs such as water, gas, or electricity among tenants in buildings that lack individual utility meters for each unit. Instead of measuring precise usage, RUBS applies a formula to divide a building’s total utility bill. That formula might be based on the number of occupants per unit, square footage, or a blend of both.

When applied to water billing, the owner pays a single, centralized water bill for the entire property. Rather than measuring each apartment’s water consumption, the RUBS model assigns each tenant a proportional share of the overall bill based on the chosen formula. For unregulated apartments, this method may be used if clearly outlined in the lease. However, for rent-stabilized apartments, the legal framework is very different. State regulations prohibit allocating the cost of required services through any formula, including RUBS.

Lease Riders Don’t Override Rent Stabilization Law

Recent decisions from the New York State Division of Housing and Community Renewal (DHCR) have reinforced the legal protections surrounding water billing in rent-stabilized units. Most recently, in Matter of Sydney Leasing, LP, issued in January 2025, the agency ruled that water charges imposed via a lease rider and based on submetered readings constituted a rent overcharge.

The owner argued that the lease rider allowed for the charges and that DHCR rules on utility billing were flexible. But the DHCR made clear that a lease rider cannot override the basic protections of rent stabilization. The tenant’s agreement to pay for a required service was void under RSC §2520.13, which prohibits tenants from waiving any rights granted under the rent laws.

This was not an isolated decision. In Matter of Brisbane Leasing Limited Partnership, decided just days prior, the DHCR reviewed a similar case where an owner had used RUBS to apportion water costs among tenants in a rent-stabilized building. The formula was based on occupancy and apartment size, and tenants received regular billing statements reflecting their share. In that case, too, the tenants had agreed in writing to the arrangement, and the owner argued that the charges were reasonable and transparent. Nevertheless, the DHCR again ruled that the use of RUBS didn't comply with rent stabilization law. Because water is a required service, any separate charge for its use, even one derived through a formula violates the regulation. The agency ordered a full refund of water charges and recognized them as rent overcharges.

Submetering Is Allowed for Some Utilities, But Not Water

It’s important to distinguish between different types of utility billing. Submetering is permitted for certain non-required services such as electricity if proper notice is given and DHCR procedures are followed. But that flexibility does not extend to services the law classifies as essential. Water, like heat, must be provided without separate charge in rent-stabilized apartments. This is true regardless of whether the billing is usage-based (via submeters) or formula-driven (via RUBS).

Owners who ignore this rule may face not only refund liability but also treble damages for willful overcharges. In some cases, tenants have successfully recovered thousands of dollars by challenging unlawful billing practices through the DHCR.