Don't Charge Tenants for Electricity 'Consumed'

If your lease requires tenants to pay you their share of the property/facility’s electric bill, don’t say they have to pay for the electricity they “consume.” That’s because the bills you receive from the electric company may include elements not related to consumption, such as demand charges. So, using the word “consume” may preclude you from passing along these non-consumption charges to your tenants.

Remember that because you draft the lease, any ambiguity it contains will be read against you. Accordingly, the word “consumed” may be found not to apply to items that aren’t consumption-related.

If you don’t believe it, consider the case of the New York City landlord who got burned by a lease requiring tenants to pay for electric current “consumed.” The tenant’s attorney seized on this language to justify not paying its portion of the electric bill charging the building for electric current available. Sure enough, the court read the “consumption” language literally and ruled that the tenant wasn’t on the hook for the current availability charges [McLelland v. Robinson, 405 N.Y.S.2d 163].

The simple way to avoid this trap is to require tenants to pay a share of any and all charges and surcharges that appear on the property/facility electric bill, including those for:

  • Availability or demand;
  • Taxes;
  • Fuel adjustments; and
  • Rate adjustments.