Reselling of Electricity or Other Utilities ©

Many landlords purchase utilities at primary rates from utility providers and resell the utilities at secondary rates to the tenants, resulting in a “profit” to the landlord. While this practice is permitted in many states, overcharges to tenants have occurred as a result of 1) improper or no sub-metering (especially in the common area), 2) lease language that prohibits the landlord from profiting on services provided to the tenant or to the common area, or 3) the landlord using the wrong rate for utilities resold to a tenant. Therefore, a utility analysis (including load studies) and an understanding of the laws of each state and the tariffs that have been filed is an essential part of a lease audit or review. When determining whether a landlord can properly profit on the resale of electricity the wording of the lease must be carefully read to determine if such actions are proper. In the case Park Place Café, Inc. v. Metropolitan Life Ins. Co., 563 S.E.2d 463 (Ga.App. 2002) the court found that the landlord could bill electricity at a profit because the lease stated that landlord may bill for such services “at applicable rates” that were “comparable to those charged by public utilities as if tenant were a direct customer thereof.” The court concluded that if different language had been used, such as “actual cost”, the landlord would not have been able to bill at a profit. Additionally, tenants must make sure to carefully read all of their lease documents to ensure exactly how amendments and other lease documents detail their responsibilities concerning utilities. In the case Record Town, Inc. v. Sugarloaf Mills LTD. Partnership of Georgia, 687 S.E.2d 640 (Ga.App. 2009), the tenant paid utilities based on per square foot basis, and was included as additional rent. The tenant signed a second amendment to the lease providing that they were no longer responsible for any charges other than rent. Because of the wording of the amendment and lease the court found that the tenant was no longer responsible for utilities. It is of the utmost importance for tenants to fully analyze all of their lease documents to determine how they may affect their obligations. The precise wording is critical in determining whether landlords have been properly billing tenants for the use of utilities.

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