Legal Question in Real Estate Law in California

It is legal and not all that uncommon. It means, most likely, that your duplex was a single unit at one time. You may want to check to make sure it was legally divided, with proper permits.

Tell the owner that you will not pay any water billing without being able to see the actual bill and getting information on the other tenant as to their own usage [before you moved in, was your unit vacant for a month with the other tenant living in the other unit so that you can calculate their water usage?]. Is the responsibility to water the areas outside the unit walls yours or the landlord's?

I believe the correct legal analysis is that the property management company used a standard form lease, not fully understanding the water meter situation at this particular property, and have contracted themselves to something they can't deliver, viz., separately-metered water. This results in the property management company being in breach of contract, in a rather minor way. If this situation were before a court, my guess is that the judge would (or should) award the tenants minor monetary relief -- possibly making the property management company pay for the water. The judge would not (a) allow the tenants out of their leases, or (b) order the owner or the manager to have an additional meter installed. As I pointed out in a previous answer, California statutes address the matter of separate meters for electricity and/or gas, but separate water meters are not addressed by state law.