News & Events
HB25-1090 and the Ratio Utility Billing System (RUBS)
On September 24, 2025, we posted an alert covering the basics of HB25-1090 (the “Bill”), which prohibits charging residential tenants hidden or “junk fees” and promotes transparency, disclosure, and limited markups on a landlord’s actual third party costs. As landlords, property managers, underwriters, and developers attempt to understand the nuances of the Bill before it goes into effect on January 1, 2026, the response to our original alert on this topic has been dominated by a single inquiry.
DOES THE BILL PROHIBIT USE OF THE RATIO UTILITY BILLING SYSTEM?
The Bill does not directly address the use of RUBS, and until the legislation evolves due to lobbying efforts, litigation, or other developments, no one can say for certain that RUBS is, or is not, permitted under the Bill. We express no opinion as to how a court may rule on this issue, but pending more information, two competing interpretations have started to emerge.
ARGUMENT THAT RUBS IS PROHIBITED UNDER THE BILL
Some have read the Bill to prohibit RUBS entirely. Proponents of this position believe that the safest course of action for landlords is either (a) to increase base rent to capture the cost of utilities, or (b) to submeter every unit. The Bill provides that “a landlord or the landlord’s agent shall not require a tenant to pay a fee, charge, or amount related to the provision of utilities that is above the amount charged by the utility provider for service to the tenant’s dwelling unit, except in accordance with [the Third Party Markup Limitation].” Some interpret this to mean that under the plain language of the statute, RUBS will, by virtue of the fact that it apportions costs based on averages, assumptions and estimates, necessarily cause a landlord to overcharge some of its tenants for their actual in-unit utility consumption, thus violating the Bill.
ARGUMENT THAT RUBS IS ALLOWED UNDER THE BILL
Others have taken the position that further increasing base rent to capture utilities (in addition to other mandatory fees being rolled into rent under the Bill) will unreasonably impact landlords’ competitiveness in the market, that submetering every unit is unrealistic and cost-prohibitive, and that landlords can use RUBS in a transparent manner that observes the spirit of the Bill. Furthermore, they contend that the specific “amount charged by the utility provider for service to the tenant’s dwelling unit” cannot be determined in master-metered multifamily housing, and because it is impossible to exceed an unidentified amount, the use of RUBS falls outside the scope of the aforementioned provision of the Bill.
Even if a court accepted this interpretation, landlords using RUBS after January 1, 2026, may still run afoul of the Bill unless they:
- provide existing and prospective tenants with clear, conspicuous, written, owner/landlord-prepared disclosures surrounding the landlord’s or property management company’s use of RUBS;
- omit common areas from RUBS calculations; and
- observe the Third Party Markup Limitation.
This is not a complete or inclusive list of every disclosure or measure that may be required if RUBS is determined to be allowed by the Bill, and there is no guarantee that the foregoing steps will insulate landlords or property management companies from the risk of litigation surrounding their use of RUBS.
CONCLUSION
The Bill does not expressly address RUBS, and no Colorado court has had the opportunity to address the correct interpretation of the Bill. Because there is no definitive answer as to the permissibility of RUBS under the Bill, and penalties for violations under the Bill are steep, the cautious approach is to stop using RUBS until the matter has been clarified by further legislation or a court decision.
Any landlord that decides to accept the risk and continue the use of RUBS should take proactive steps that may improve its chances of compliance by honoring the overarching purpose of the Bill, which is to provide tenants with transparent, inclusive, and predictable rental costs. The conversation surrounding similar bills in other states, such as California, suggests that lawmakers are primarily concerned with the deceptive and opaque misuse of RUBS as a means of profit generation, rather than any inherent inequity in RUBS as a method of cost apportionment.
Nothing in this alert or any Otten Johnson alert constitutes legal advice or attorney work product, and it should not be relied on as such. Otten Johnson is a commercial real estate and land use firm and does not handle residential leasing matters. For additional information or legal advice on this topic, we recommend contacting a firm that specializes in Colorado residential landlord-tenant law.
