Which costs can landlords pass on to tenants?

A landlord can usually pass on to tenants the ongoing running costs of the building and the shared services the tenant uses: cleaning of common areas, common electricity, water and sewage, heating and hot water, waste collection, lift operation and its maintenance contract, garden care and caretaking. In some countries building insurance and property tax are recoverable too. Costs of owning and preserving the property, such as management fees, repairs, replacements, reserve fund contributions and financing, normally stay with the owner. In every case the tenancy agreement must list the costs, local law must allow them, and you may recharge only the actual cost, fairly split and documented.

Which costs are recoverable differs a lot between countries, and in several places the law contains a closed list. Use this guide to understand the principles and to check your own statements, then confirm the details against your lease and local rules. The worked example uses euros; the maths works in any currency.

The principle: running costs vs owning costs

Most systems draw the same line, even if the details differ.

• Running costs arise because the building is used and its shared services operate: energy, water, cleaning, waste, the lift running every day. They recur, and the occupier benefits from them directly. These are the costs that are typically recoverable.
• Owning costs keep the asset in good shape or improve it: repairs, renewals, administration, saving for future works, interest. They benefit the owner, who keeps the value, so they typically stay with the owner.

When you are unsure about an item, ask which side of this line it sits on. It will not always give you the legal answer, but it explains most of them.

Recoverable and non-recoverable costs at a glance

Cost item	Usually recoverable from a tenant?	Notes
Cleaning of common areas	Often yes	Ongoing cleaning, not one-off clean-ups after works
Common electricity	Often yes	Stairwell lighting, door entry, pumps
Water and sewage	Often yes	By meter where individual meters exist
Heating and hot water	Often yes	Some countries require billing mostly by consumption
Waste collection	Often yes	Municipal fees and bin services
Lift	Partly	Electricity, inspections and routine servicing often yes; repairs and replacement usually no
Garden and grounds	Often yes	Routine care yes; redesign or new installations usually no
Caretaker	Partly	Cleaning and routine tasks yes; time spent on repairs or administration usually no
Building insurance	Depends on country	Recoverable in some systems, an owner cost in others
Property tax	Depends on country	Passed on in some countries, an owner cost in others
Management or administration fee	Usually no	Varies by country and lease
Repairs and maintenance	Usually no	Small repairs from everyday use are sometimes the tenant's under the lease
Reserve fund contributions	Usually no	Saving for future works preserves the owner's asset
Major works and improvements	Usually no	Some countries allow a separate rent increase after improvements instead
Mortgage, bank charges, owner's legal costs	No	Pure owner costs

The table describes common patterns, not the law of any one country. Your lease and local rules decide.

Three conditions before you recharge anything

1. The tenancy agreement says so. Most systems only allow you to pass on costs that the contract lists, or at least refers to clearly. A vague clause such as "the tenant pays all costs" may not be enough. If the contract is silent, the rent is often treated as covering everything.

2. Local law allows it. Some countries publish a list of recoverable costs, and anything outside it stays with the owner regardless of the contract. Others leave more to agreement but still limit what can be charged.

3. You charge actual costs, fairly split and documented. Recharges must match real invoices, be divided by a fair key that is agreed or prescribed, and be shown in a clear statement the tenant can check. Many places also set a deadline for the annual statement; late statements can mean you lose the right to claim a balance.

Mixed items: splitting a single invoice

Some invoices contain both recoverable and non-recoverable parts. You have to separate them.

• Caretaker. If a caretaker spends part of their time cleaning and gardening and part on small repairs and administration, only the first part is typically recoverable. Ask the building manager for a breakdown or a reasonable estimate.
• Lift. A basic maintenance contract covering inspections and servicing is usually recoverable. A "full" contract that also includes repairs and spare parts needs the repair share removed.
• Garden. Mowing, pruning and leaf clearing are routine care. Replacing a fence or redesigning the courtyard is not.
• Cleaning. Regular stairwell cleaning is a running cost. Cleaning up after building works belongs to the works.

Keep the breakdown with your records. It is the first thing a tenant or adviser will ask for if the statement is challenged.

Worked example: from the building statement to the tenant's bill

An owner lets a flat in an apartment building. The building's annual statement shows the flat's share of costs. In this hypothetical case, the lease and local rules allow running costs and building insurance to be passed on, but not management, repairs or the reserve fund.

Item	Flat's share per year	Recoverable?
Cleaning of common areas	€420	Yes
Common electricity	€120	Yes
Water and sewage	€480	Yes
Waste collection	€180	Yes
Lift maintenance contract	€210	Yes
Garden care	€150	Yes
Building insurance	€240	Yes (in this example)
Management fee	€360	No
Repairs	€300	No
Reserve fund contribution	€600	No
Total	€3,060

• Recoverable from the tenant: €1,800
• Stays with the owner: €1,260, or €105 per month

The tenant paid advance payments of €140 per month, so €1,680 over the year. The year-end statement shows €1,800 − €1,680 = €120 still to pay. For next year, the owner raises the advance to €150 per month to match the actual costs more closely.

The €1,260 that stays with the owner is a real operating cost. It belongs in your net yield and rental property cash flow, not in the tenant's bill.

Advance payments and the annual statement

In most systems recoverable costs are collected through monthly advance payments and settled once a year.

1. Set realistic advances, based on last year's actual costs plus known changes.
2. Collect the invoices and the building statement once the year is over.
3. Separate recoverable from non-recoverable items, including the mixed invoices above.
4. Apply the allocation key for each item: floor area, occupants, meter readings or equal shares, as agreed or required.
5. Deduct the advances paid and show the balance.
6. Send a clear statement in time, and let the tenant inspect the invoices.
7. Adjust next year's advances if the gap was large.

Where the tenant occupies only part of the building or the year, the allocation key and move-in or move-out dates matter. Our guide on how to split utility costs between tenants works through the common keys, and the service charge calculator splits each cost item by its own key and shows each unit's balance.

Why the split matters for owners

The split decides your true return. Two flats with the same total service charge can leave very different amounts with the owner, depending on how much of it is management, repairs and reserve contributions. Before you buy, ask for the building's statements and budget and work out the non-recoverable share. Our guide to service charges explained shows how building statements are put together, and reserve fund planning explains why the reserve contribution may rise over time.

If you use a letting or management agent, check whether their fee is charged to you directly or to the building, and whether any part of it appears in the tenant's statement. Property management fees explained covers the common fee structures.

Common mistakes

• Recharging costs the lease does not list. Even a recoverable cost type usually needs a basis in the contract.
• Passing on the whole building statement. Management, repairs and reserve contributions are often not recoverable.
• Not splitting mixed invoices for caretakers and lift contracts.
• Adding a margin or admin fee to the actual cost.
• Using an unfair or changing allocation key without agreement.
• Sending the statement late, which in some places means losing the balance.
• Refusing to show invoices. Tenants usually have the right to check the figures.
• Counting recoverable costs as income when calculating yield. They pass through; they are not profit.

Key takeaways

• Running costs of the building and shared services are typically recoverable; owning costs usually are not.
• Management fees, repairs, replacements, reserve contributions and financing normally stay with the owner.
• Insurance and property tax depend on the country.
• You can only recharge what the lease lists and local law allows, at actual cost, fairly split and documented.
• The non-recoverable share is a real cost: include it in your yield and cash flow.