Landlord vs Tenant-Paid Utilities: Which Is Better for Your Bottom Line?

The Two Traditional Approaches

For decades, Ontario landlords have had two choices when it comes to utilities:

1. Landlord pays: Utilities are included in the rent. The landlord absorbs all utility costs.
2. Tenant pays: Each unit has its own utility account directly with the utility company. Tenants pay their own bills.

Each approach has clear advantages and drawbacks. The right choice depends on your building type, your market, and your financial goals. But there is also a third option that combines the best elements of both: submetering.

Option 1: Landlord-Paid Utilities (Utilities Included in Rent)

This is common in older multi-unit buildings, especially those built before individual metering became standard. The landlord receives one utility bill for the entire building and factors those costs into the rent.

Pros of Landlord-Paid Utilities

• Simpler tenant experience. One payment covers everything. This can be attractive to renters who want predictable monthly costs.
• Competitive listings. "All utilities included" is a powerful marketing phrase, especially for tenants comparing units.
• No billing headaches. You deal with one account per utility. No coordinating with tenants or third-party providers.
• Easier budgeting for tenants. Tenants know exactly what they owe each month with no surprises.

Cons of Landlord-Paid Utilities

• No incentive for conservation. When utilities are free to the tenant, consumption goes up. Way up. Tenants leave lights on, crank the heat, and run appliances without a second thought.
• Rising costs eat your margin. Ontario utility rates have increased significantly over the past decade. Your rent increases are capped by the annual guideline (2.5% for 2025), but your utility costs are not. The gap widens every year.
• Unfair cost distribution. A tenant who conserves energy subsidizes a neighbor who does not. You have no mechanism to differentiate.
• Lower NOI. Higher expenses mean lower net operating income, which directly reduces your property's value and your borrowing power.
• Unpredictable expenses. A cold winter or hot summer can spike your utility costs with no way to pass those increases through.

Option 2: Tenant-Paid Utilities (Direct Accounts)

In this setup, each unit has its own meter and its own account with the utility company. The tenant signs up directly and receives their own bill. This is standard for single-family homes and some newer multi-unit buildings that were designed with separate metering.

Pros of Tenant-Paid Utilities

• Zero utility expense for the landlord. Your only utility costs are for common areas. Unit costs are entirely the tenant's responsibility.
• Natural conservation incentive. Tenants who pay their own bills use less energy. Period.
• Predictable landlord expenses. Your costs are limited to common areas, which are relatively stable and within your control.
• Higher NOI. Without utility expenses dragging down your income, your property is more valuable and more attractive to lenders.

Cons of Tenant-Paid Utilities

• Not always possible. Many older multi-unit buildings only have one meter for the whole building. Without individual meters, you cannot set up separate utility accounts.
• Less competitive listings. Tenants often prefer "all-inclusive" listings and may choose a competitor who includes utilities, even if the total cost is similar.
• Tenant credit issues. Utility companies may require deposits from tenants with poor credit, which can deter some applicants.
• Disconnect risks. If a tenant does not pay their utility bill, service can be disconnected. In winter, this can become a health and safety issue that you may need to address as the property owner.
• Turnover complications. When a tenant moves out, utility accounts need to be transferred or closed. Gaps in service between tenants can cause issues.

Option 3: Submetering (The Best of Both Worlds)

Submetering is a third approach that has been gaining momentum among Ontario landlords. It gives you the cost recovery benefits of tenant-paid utilities while maintaining the simplicity of a single building account.

With submetering, the building stays on one master meter with the utility company. But individual sub-meters are installed for each unit, measuring each tenant's actual consumption. A licensed submetering provider handles the meter reading, billing, and tenant support.

Why Submetering Wins

• Works in any building. You do not need individual utility meters or separate accounts. Sub-meters can be added to virtually any multi-unit building, regardless of age or existing infrastructure.
• Full cost recovery. Tenants pay for their actual usage, just like with direct utility accounts. Your exposure is limited to common areas.
• Conservation incentive. Studies show submetered tenants reduce consumption by 15 to 30 percent. That benefits the whole building.
• Professional billing. Providers like Axis Meter handle all billing, payment collection, and tenant inquiries. You are not playing utility company.
• No credit issues. The building's utility account stays in your name. Tenants receive bills from the submetering provider, not the utility company. No deposits, no credit checks, no disconnection risks.
• Smooth turnovers. When a tenant moves out, the sub-meter reading is taken for a final bill. The new tenant starts fresh. No utility company account transfers needed.
• Regulatory compliance. Licensed Ontario submetering providers handle all OEB and Measurement Canada requirements. You stay compliant without doing the paperwork.

Side-by-Side Comparison

Here is how the three approaches stack up on the factors that matter most to landlords:

Cost Recovery

• Landlord-paid: None. You absorb all costs.
• Tenant-paid (direct): Full recovery. Tenants pay the utility company directly.
• Submetering: Full recovery. Tenants pay the submetering provider based on actual usage.

Works in Older Buildings

• Landlord-paid: Yes (default for bulk-metered buildings).
• Tenant-paid (direct): Only if individual utility meters already exist.
• Submetering: Yes. Sub-meters can be retrofitted into any building.

Tenant Experience

• Landlord-paid: Best (no bills to worry about).
• Tenant-paid (direct): Moderate (separate account and deposits required).
• Submetering: Good (clear bills based on actual usage, no deposits needed).

Landlord Effort

• Landlord-paid: Low (pay the bills).
• Tenant-paid (direct): Low (tenants manage their own accounts).
• Submetering: Very low (provider handles everything).

Impact on NOI

• Landlord-paid: Negative (expenses reduce your income).
• Tenant-paid (direct): Positive (minimal utility expenses).
• Submetering: Positive (utility costs recovered, NOI increases).

The Financial Impact Over Time

Let us look at a practical example. Imagine a 10-unit building in Ontario with total monthly utility costs of $4,000 ($3,200 unit consumption + $800 common areas).

Landlord-Paid Scenario (5 Years)

• Year 1: $48,000 in utility costs
• Year 2: $49,920 (4% increase)
• Year 3: $51,917
• Year 4: $53,993
• Year 5: $56,153
• Total 5-year cost: $259,983

Submetered Scenario (5 Years)

• Year 1: $9,600 common area costs (tenants cover the rest)
• Year 2: $9,984
• Year 3: $10,383
• Year 4: $10,799
• Year 5: $11,231
• Total 5-year cost: $51,997

5-year difference: $207,986

That is over $200,000 that stays in your pocket instead of going to the utility company. Even accounting for rent reductions on existing tenancies, the savings are transformative.

Making the Transition

If you are currently paying utilities and want to switch to submetering, here is what the process looks like:

1. Get a building assessment. A submetering provider evaluates your electrical panels and plumbing to design the meter layout. Axis Meter offers free assessments for Ontario landlords.
2. Review your legal obligations. Under the RTA, you must provide proper notice and reduce rent for existing tenants when transferring utility costs. Consult with a legal professional if needed.
3. Communicate with tenants. Transparency matters. Explain the change, the rent reduction, and what their new bills will look like. Most tenants respond well when the process is clear and fair.
4. Install and activate. Installation typically takes one to two days. Once meters are active, the provider begins reading and billing.
5. Monitor results. Track your utility expenses and NOI using BricksAbove to see the impact in real time.

Which Option Is Right for You?

The answer depends on your situation:

• If your building already has individual meters: Tenant-paid (direct) is the simplest approach. Tenants sign up for their own accounts and you are done.
• If your building is bulk-metered and you want to keep it simple: Landlord-paid works, but understand that it is costing you more every year.
• If your building is bulk-metered and you want to maximize your NOI: Submetering is the clear winner. It gives you cost recovery without the complications of rewiring for individual utility meters.

Want to see how your property stacks up financially? Our free cash flow calculator lets you plug in your income and expenses to see your true monthly returns. It works as a comprehensive rental income calculator that accounts for vacancy, maintenance reserves, and operating costs.

The Bottom Line

Paying your tenants' utility bills is one of the most expensive decisions a landlord can make, and it gets more expensive every year. Tenant-paid utilities solve the problem but are not always feasible. Submetering bridges the gap, giving you full cost recovery, conservation benefits, and professional billing without major infrastructure changes.

If you have been absorbing utility costs and watching your margins shrink, it is time to explore your options. The numbers make the case clearly, and the transition is easier than most landlords expect.

Ready to take control of your property finances? Start with BricksAbove to track your expenses and see exactly where your money is going. Pair it with submetering and watch your NOI transform.