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Individual water meters in body corporate properties

Individual water meters in body corporate properties

Introduction: Individual water meters in body corporate properties

Individual water metering in body corporate properties continues to be a hot topic for our committees and owners.

This is a question asked of our office very regularly, and what seems like a simple question is really just the tip of the iceberg.

Background

The way water charging has been administered has changed significantly since the strata building boom of the 1970s. Strata and body corporate developments of all ages are now subject to the 2021 standard for water charging, even if that is quite different to how those properties were originally set up.

In 2008, it became possible for landlords to charge their tenants for water consumption if the property is individually metered and water-efficient. This is often the reason that some bodies corporate are motivated to investigate and consider changing the way their water billing is set up.

How is water charged?

Water distributor-retailers have different methods of supply and charging for water. Depending on the local government area, your water charging will be administered by:

Queensland Urban Utilities Brisbane

Ipswich

Lockyer Valley

Scenic Rim

Somerset

Unitywater Sunshine Coast

Moreton Bay

Redland City Council Redland local government area
Gold Coast City Council Gold Coast local government area
Logan City Council Logan local government area

 

For body corporate developments, water is charged in one of 3 main ways, depending on the age and structure of your body corporate development:

Body corporate pays all water Water billed on entitlements Separate water meters
Occurs rarely Common for pre-2008 buildings Standard after 2008
  • All water for the site including common areas and individual units is paid by the body corporate.
  • Owners do not receive any water bills directly.
  • The water expense for the whole site makes the body corporate levies very high.
  • The total water for the site (including common areas and individual units) is divided amongst the lot owners based on the contribution schedule lot entitlements.
  • This is the same ratio used to calculate administrative and sinking fund levies.
  • Each owner receives a separate bill from the water retailer.
  • Each unit has a sub-meter read by the water retailer.
  • Each unit owner receives a water bill for their individual unit consumption.
  • The body corporate receives a water bill for the water used in the common areas. This common area bill is paid for by owners through body corporate levies.

 

The method for your body corporate applies to all lots within that body corporate. It is not possible to have some units with individual water meter reading, and other units in the same complex being billed on the contribution schedule lot entitlement method.

Are the water billing methods fair?

Fairness in a body corporate development is always difficult to establish. Unless your building has separate water meters, the water will be apportioned based on the contribution schedule lot entitlements.

Lot entitlements attach to each lot, and they are detailed in the community management statement. Lot entitlements are created by the property developer, and take into account the size, type and amenity of each lot. This is how a penthouse lot owner would generally pay higher levies than the owner of a smaller unit on a lower level.

Example:

  • A developer creates a new apartment building with 25 units and some shared recreation areas.
  • The total lot entitlements for the entire scheme is 100
  • You buy lot 1, which is larger than some of the other units
  • Lot 1 has 5 lot entitlements
  • You therefore pay 5/100 of the body corporate costs, including maintaining the shared recreation areas.

Contribution schedule lot entitlements are used to apportion the body corporate administrative and sinking fund levies.

Without actual data on the amount of water used by each unit, the total water consumption can only be pooled and then divided by the contribution schedule lot entitlements.

These lot entitlements are based on the potential use of each lot, not the actual use. Larger units generally pay a higher share of the total, even though they may have the same or lesser amount of water use.

In the same way, body corporate owners contribute to pool maintenance, even if they never swim in the pool. They contribute based on their contribution schedule lot entitlement, which recognises their ability to swim in the pool if they wanted to.

This method can result in people paying for services like water, in different proportions to how those services are used.

Whilst this is an imperfect system, it is the best method available when the actual use of facilities is not known (like if there are no separate water meters).

How do you know what method is being used in your body corporate?

For most water retailers, the current method can be deduced by looking at any water bill within the scheme. The bill should always include a meter reading, and that can be used to establish whether the water is apportioned based on actual readings, or on a percentage of the total for the site.

Let’s look at Queensland Urban Utilities:

Shared water meter, water is billed based on contribution schedule lot entitlements

Figure 1 – Shared water meter, water is billed based on contribution schedule lot entitlements

In this image, the total water consumption for the site is shown as 54kL for the period. The particular lot owner who received this bill has 25% of the total contribution schedule lot entitlements, so the owner is paying for 25% of the total water used, which is 13.50kL.

Individual water meter, water is billed based on actual consumption

Figure 2 – Individual water meter, water is billed based on actual consumption

In this image, there is no calculation of percentages, and the owner is being charged for their own meter reading. The serial number of the unit is unique to the unit and will not match other owners’ bills.

Whilst each water distributor-retailer’s invoice looks different, they generally show the same types of information. If the current method is not clear, you can call your local water retailer and ask them.

Water usage -vs- other related charges

A water bill includes more than just water usage. Each water bill includes:

  • Water usage (based on litres used)
  • Water service fees
  • Sewer service fees

Any change to the water billing arrangements (separate meters or not) will not impact the water service fees, and sewer service fees.

Case study:

A typical Queensland Urban Utilities water bill

Figure 3 – A typical Queensland Urban Utilities water bill

In this example, the water bill splits out how much of the bill relates to water usage, water services, and sewer services.

Type Amount If water usage halved If water usage doubled
Water usage $57.73 $28.87 $115.46
Water services $58.14 $58.14 $58.14
Sewerage services $139.95 $139.95 $139.95
Total $255.82 $226.96

(saving $28.87)

$313.55

 

In this real-life example, if the water usage for this unit halved (imagine the resident only uses water every second day), the bill would only reduce by $28.87. The rest of the costs on the bill are anchored by the fixed-price water service charge, and sewer service charge.

Common myths about separate water meter billing:

Myth Reality
If my property becomes separately metered for water, I can pass on my whole water bill to my tenant. (example: $255.82/quarter) Only the amount for water consumption can be passed on. (example: $57.73/quarter)
A separate water meter is all I need to start charging my tenant for water. A plumber must also inspect the unit, and certify that all water devices are low-flow and water-efficient. Often pre-2008 constructed buildings are not water-efficient and need to be upgraded at the owner’s cost.
If my property becomes separately metered for water, I won’t pay for water usage at all. Moving from contribution schedule lot entitlement billing to separate meters means the body corporate will start receiving a water bill for the common areas.

This will increase levies, and cannot be passed on to the tenant.

Our building has water meters already, let’s just use those. Water retailers have very strict requirements for water meters. In many cases even if buildings have existing separate water meters, they are often non-compliant and the water retailer will not rely on them. Usually there is an up-front cost to replace all water meters.
I use less than the average amount of water. Separate water bills will mean my bill becomes cheaper. Separate water meters may cause bills to increase, even if the person’s actual water usage is lower than the average in the complex. This depends on how the site was structured before the change to separate water meters.
Every owner in the body corporate will agree with me and approve this project – it benefits everyone. The total usage of water will not change. For every owner who is using less than average, another owner is using more than average.

For every water bill that reduces, another owner’s bill will increase.

What savings can I expect if our body corporate installs water meters

For some owners, particularly investor owners, there is a genuine saving in water bills if the body corporate installs individual water meters. This benefit however must be compared against the cost for installing the water meters and other related infrastructure and plumbing upgrades.

To categorise who wins and who loses in separate water metering, let’s look at an example building:

  • 10x identical townhouses
  • Some townhouses are owner-occupier, some are rented
  • Some residents are singles or couples, some have families
12 Example St, Brisbane
Owner occupiers Investor owner Tenant
Single/couple

(low water use)

Family

(high water use)

Tenant mix will change during ownership
Water bill will decrease, as actual usage is below average. Water bill will increase, as usage is above average. Owner’s water bill may increase OR decrease depending on usage by tenant.
Levies will increase slightly due to common area usage Owner may be able to recoup water usage portion from tenant, if property is water efficient.

If owner can recoup from tenant, owner’s cost should reduce to just the fixed charges.

Tenant may start to receive water bills from owner, if property is water efficient.

 

Name on account: In Queensland, it is not possible for the primary water bill for a property to go into the name of the tenant.

Whilst in other states, tenants can be expected to put the water service into their own name (just like electricity, internet and gas), in Queensland the water account is always in the name of the owner.

For investor-owners who are entitled to recover water usage, it is up to the owner to recoup the water usage directly from their tenant.

Do I use a lot of water or a little?

Guessing whether your actual water usage is higher or lower than your estimated usage can be very tricky. Remember that when water is apportioned based on contribution schedule lot entitlements, each owner is not necessarily paying the same.

Larger units with more bedrooms generally have more entitlements and therefore pay a higher share of water, even if they are not using more water.

A unit which has a lower than average number of entitlements is actually getting a passive discount on their water consumption using the entitlement billing method. Their lower number of entitlements means they are assumed to use less water, so they pay for less water even if they use more water.

For owner-occupiers, it is difficult to predict whether your bill will go up or down after separate water metering. Just because an owner uses less water than average, does not mean the new bills will be lower – in fact, they can go up as that passive discount is taken away when actual water meter readings are used.

 

Let’s look at another example:

This example has a mix of 2-bedroom and 3-bedroom units, the 3-bedroom units use more water (which is to be expected)

Total water usage cost for the site = $700 per quarter

Unit 1 Unit 2 Unit 3 Unit 4 Unit 5
2 bedrooms 2 bedrooms 2 bedrooms 3 bedrooms 3 bedrooms
5 entitlements 5 entitlements 5 entitlements 8 entitlements 10 entitlements

 

Amount of water used
50L per day 60L per day 70L per day 80L per day 90L per day

 

Before separate water meters
5/33 entitlements 5/33 entitlements 5/33 entitlements 8/33 entitlements 10/33 entitlements
$106.06 $106.06 $106.06 $169.70 $212.12

 

After separate water meters
50/350L 60/350L 70/350L 80/350L 90/350L
$100.00 $120.00 $140.00 $160.00 $180.00

Let’s look at what happened:

  • Unit 1, 2 and 3 – These owners were previously paying the same amount for water ($106.06) as they had an equal number of entitlements, even though their real water usage was different. All of these owners were using less than the average consumption. After water meters, only the lowest water user made a saving.

 Unit 2 water cost increased, even though their personal water consumption was 60L per day, which is less than average for the building, and less than average for their local area. This probably came as a shock to this owner, who would have expected their water bill to reduce.

  • Unit 4 and 5 – These owners are high water users, using 15% more and 29% more than the average household water user. Despite being higher water users, the move to separate water meters actually benefitted these two owners, because the old method of contribution schedule lot entitlements had assumed their consumption to be even higher than it was.

The saving in this example for high water users, is subsidised by units 2 and 3 who pick up the difference.

Impact of empty units on average

It is logical to think that when based on entitlements, lower water users may be subsidising higher water users.

In reality, both high and low water users are also being subsidised by units with zero actual consumption (including empty units, for rent or for sale, units being renovated, and units where the resident spends time away from home).

All unit owners pay for water under the entitlement method, even if their unit used zero water during that time. During the time that the consumption is zero (or very low), these owners are subsidising everyone else in the complex.

Remember the principle that:

  • Separate water meters don’t change the total water consumption of the complex
  • Every litre comes off your bill, goes into someone else’s bill

Tenants, leases, and water efficiency

As mentioned earlier, investor owners face some additional challenges before they can start to recover the water usage component of bills from their tenant.

What does the lease include?

Leases in Queensland are regulated by the Rental Tenancy Authority (RTA). The standard form lease includes a question about whether the tenant is to pay for water consumption.

If you have an existing lease that was signed before the separate water meters were installed or commissioned, the lease may say “NO” – the tenant does not pay for water usage.

Even after the separate water meter project is completed and the billing is adjusted, investor owners may need to wait until the existing lease finishes before recovering from their tenant.

Water efficiency

Rental tenants can only be charged for water consumption if the property is separately metered, and water efficient.

In Queensland, a plumber must certify that a property is water efficient by inspecting the property, and issuing a water efficiency certificate. This is a service which the owner of the lot must pay for.

If the property is not water efficient, the plumbing fixtures must be upgraded and re-certified before water can be charged. This may mean the owner is required to replace:

  • Kitchen sink taps
  • Bathroom taps
  • Toilets
  • Showerheads

Who will charge the tenant?

Even after separate water metering, the water bill cannot be put directly into the tenant’s name. If the owner is entitled to recover the water consumption from the tenant, that process needs to be managed by someone.

For owners who use a real estate property manager, generally they are capable of recovering the water usage cost in addition to rent. They may however charge an additional fee for this service, if it is not part of the owner’s rental service agreement with the agent.

The body corporate wants to upgrade to separate water meters. What is involved?

Once the body corporate has considered the pros and cons of water meters, it may decide to proceed further with investigation and installation. The following steps must be followed:

Flowchart: How to upgrade water meters in a body corporate

Question 1: Are there existing water meters?

Some buildings are constructed with existing separate water meters, of varying quality and standards.

For townhouses, separate water meters are generally located:

  • Low on the outside of the building, where the main water line enters the townhouse
  • In an in-ground water meter box with plastic or metal lid, in the garden or grass areas
  • For groupings of townhouses (e.g. duplexes), the group of water meters may be located in a central area

For apartment or unit buildings, separate water meters are generally located:

  • In a meter room or service room
  • In a meter cupboard, usually on every level of the building
  • Inside each apartment, behind an access panel in the kitchen, bathroom or laundry

In an apartment or unit buildings, there may be other separate meters for hot water, gas, air-conditioning chilled water. These are not suitable for separate water metering as they do not measure the normal cold water supply into each lot.

Question 2: Are the existing water meters compliant with billing standards?

If your body corporate has existing separate waters meters, it may be possible to arrange for the water distributor-retailer to read these existing meters and issue water bills based on those readings. For that to occur, the existing water meters must meet very strict requirements which are set by the water distributor-retailer. Each distributor/retailer has different requirements for water meters, and this depends on the local government area of your body corporate.

The requirements generally are:

  • Specific meter manufacturers’ products and serial numbers must be installed
  • Installed in-ground or above-ground depending on the manufacturer’s product
  • In-ground meters must be installed in an approved meter box with lid
  • In-ground meters must be buried at the correct depth, and cannot be installed in driveways
  • The water meter must have an upstream isolation valve
  • The isolation valve must be a specific manufacturer/brand and type
  • Above-ground water meters must be mounted at a specific height, and with a minimum gap between each meter
  • If above-ground meters are used, they must be installed with adequate lighting during daylight hours, not in a classifiable confined space
  • The cupboard must be identified with specific words, locked with specific locks and must be waterproof

Automatic Meter Reading (AMR)

If the separate water meters are installed behind any gate or fence structure (whether it is locked or unlocked), or inside any part of a building, the body corporate must also install and maintain an Automatic Meter Reader (AMR) which is a device which takes the water meter readings in an electronic format. These can be wired or wireless systems, and enable the water distributor-retailer to visit the site and use a special device to collect the meter readings, usually without needing to enter the property.

These AMR systems are an additional expense to the body corporate if they are required.

How to know if existing water meters are compliant

The water distributor-retailer does not carry out inspections of water meters, or give advice. The distributor-retailer will provide a document containing the relevant standards, but it is up to the body corporate to self-investigate to determine if its water meters are compliant.

If the body corporate believes the water meters are compliant, it must then arrange for a properly qualified plumber to inspect every single meter and provide a detailed report including:

  • The meter product, serial number, location and reading for each lot
  • A statement that all meters are working, and comply with the required technical standard

If some or all of the meters do not meet the standard, the body corporate cannot apply for individual water metering and will need to rectify any meter non-compliance, and have the property re-inspected.

The cost for the plumbing inspection only of each meter (not making any upgrades or replacements) is generally around $50-100 per lot, depending on the size of the development.

As a general rule – if your body corporate building was built before 2008, or is not currently on individual water meter billing, that is a very good indication that your water meters will not be compliant with the current standards.

Our body corporate needs to upgrade meters to apply for individual billing – What are the steps?

If your body corporate wants to upgrade the existing water meters to be compliant with the correct standard for separate water meter billing, or wants to install brand new meters for this purpose, the normal body corporate decision-making rules will apply.

The body corporate will have to consider:

  • The body corporate major spending limit
  • The body corporate improvement limit
  • What type of decision is required?

Installing brand-new water meters, or upgrading water meters to meet a higher standard is an improvement, which is distinct and separate to simply repairing and maintaining existing infrastructure.

The type of survey plan is relevant to whether the body corporate can make this decision on behalf of all owners, or if all owners will need to individually decide to comply.

Building format plan (BFP) Standard format plan (SFP)
Applies to:

Apartment/unit buildings

Some townhouse complexes

Applies to:

Some townhouse complexes

  • The body corporate generally owns the building structure.
  • The body corporate generally owns the cold-water service pipes, and any existing meters.
  • The body corporate can decide (at an AGM) to install new meters, or replace existing meters which it owns.
  • All owners are bound by the majority decision at an AGM.
  • The lot owner generally owns the land on which their townhouse is situated.
  • The lot owner generally owns their own cold-water service pipes, and existing meters.
  • The body corporate cannot force the owner to upgrade meters, or install new meters on the lot owner’s own property.
  • The body corporate may install new water meters on the common property, if the individual water supply lines run through the common property.
  • Remember, the meter must be installed after that water line has branched off to the individual lot.

Note: the format plan (BFP or SFP) is set at original development and cannot be changed.

The difficulty for SFP schemes

The reality is that for most SFP body corporate schemes, the location of the plumbing makes it nearly-impossible for the body corporate to install water meters on common property.

In that case, 100% of owners would need to:

  • Agree with the project
  • Install and pay for their own compliant water meter on their own property
  • Agree to pay for any related costs (such as the automatic meter reading (AMR) system)

As the entire complex can only have one billing method which applies to all lots, if even one single owner does not agree with the project or the costs, then the body corporate cannot move to individual water meter billing.

How can the project be funded?

You’ve identified that your body corporate is a BFP type, and has the ability to make a decision to replace or upgrade the water meters to move to separate water meter billing.

What about paying for it?

The body corporate sinking fund is a cash reserve that is collected for specific future maintenance expenses for the common property. Installing new water meters is an improvement, so it cannot be paid from the existing sinking fund balance.

The body corporate must issue a special levy to owners for the installation or upgrading of separate water meters, and related AMR devices.

Costs compared to benefit

A typical installation of new separate water meters may be in the range of $600-$2,000 per lot. Owners who are anticipating a saving in their water bills should weigh the saving against the up-front cost, and consider whether it is worthwhile to progress the project if it will take up to 20 years to break even on the investment.

For owners who can expect their water bill to rise, there is a substantial up-front cost, plus then the responsibility to pay increased water bills based on higher usage.

The real winner in the project may be the plumber who receives a large contract for installation of the water meters and gets paid by the body corporate up front.

The body corporate’s share of the water being consumed

As we covered earlier, when water is billed on entitlements the body corporate’s portion for the shared areas is automatically divided amongst owners based on their entitlements. This means the body corporate doesn’t receive a water bill at all.

For buildings that have separate water meter billing, the body corporate pays for any water used at the site which is not billed to an individual owner.

Depending on each body corporate site, this may be a small or a large amount. Buildings with swimming pools, extensive lawns and gardens with irrigation etc may use a substantial amount of water on the common areas.

Some buildings can receive common area water bills ranging from $500 per year to $30,000 per year.

Separate water meter billing means the body corporate must pay that invoice direct to the water distributor-retailer. If the body corporate has previously not paid a water bill, any new costs will need to be funded by increasing levies for owners.

This increase to levies also diminishes the benefit that some owners may achieve by reducing their own personal water bill, as the body corporate will take over some of that cost responsibility. All body corporate water cost are funded by owners, and you guessed it – this is based on contribution schedule lot entitlements.

What about new buildings?

The good news is that the Queensland legislature recognised this issue affecting strata or body corporate developments, and in 2008 enacted legislation requiring that all new body corporate developments are built with separate water meters.

In new developments, the original developer must pay for and install a separate water meter for each lot, and then provide the details of that installation to the water distributor-retailer.

It can take the water distributor-retailer a long time (up to 18 months after development) to actually establish the accounts and start billing lot owners individually, however it is now the norm for Queensland developments.

Summary

The length and complexity of this information is a good indication that a separate water meter project is a very difficult, time-consuming and often costly exercise for the body corporate. In some cases, the time for pay-back of the initial investment by individual owners can be more than 20 years.

Every building will have some winners and some losers when the billing method is changed. This can make it hard for the body corporate to make majority decisions, as owners often vote to protect their own best interests.

In some cases, the individuals who push for this within their body corporate can end up at a disadvantage after the billing is changed, and that can be difficult to predict.

When you ask BCsystems for assistance with this project, it is our responsibility to make the committee aware of the process and complexity, so that your body corporate can share this information with owners and make properly informed decisions.

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