REALWorld Law

Commercial leases

Costs of utilities

How are utilities and telecommunications which serve a property occupied by several lessees paid for?

United States

United States

Tenants of multi-tenanted properties will typically be charged for electricity either (a) directly by the electricity provider if the premises is separately metered, or (b) by the landlord based either upon their proportionate share of the landlord’s electricity bill as measured by sub-meter readings or upon a fixed electrical charge subject to adjustment if, for instance, the cost of electricity charged to the landlord or the tenant’s electrical consumption increases. How water is paid for will generally depend upon how the water is to be used – in office and most retail leases, for instance, the landlord will often pay for the cost of water for drinking and lavatory purposes. In restaurant, industrial and other leases where there is more significant water usage, the tenant will often be responsible for the cost of its actual use, measured by sub-meter where possible.

Payment of heating and air conditioning charges depends upon the type of property in question. For example, with retail leases the tenant will often be directly responsible for procuring heating and air-conditioning at its own expense. However, in the case of multi-tenanted office buildings landlords will often provide the equipment and pay for the heating and air conditioning of tenants’ premises during regular business hours (subject to reimbursement through the shared operating expenses mechanism whereby all of the tenants proportionately share the cost of maintaining and operating the common facilities) and tenants may be charged for such service provided outside of regular business hours. Tenants are generally responsible for procuring telecommunications services at their own expense.