Working on a commercial lease audit in Dallas and found something fishy. Tenant is being charged for 100% of the building's electricity under their "proportionate share" clause, but they only occupy 40% of the space. The lease says they pay their "pro rata share" but landlord is passing through the full $8,400/month Oncor bill. Has anyone seen this type of overcharge before? The lease language seems vague enough that landlord thinks they can get away with it.
Triple Net Lease - Tenant Charged for Entire Building Load?
Marcus, I've seen this exact scenario multiple times here in Tulsa with PSO accounts. The key is in the lease definition of "operating expenses" and whether utilities are specifically included or excluded from the pro-rata calculation. Did you check if there's a separate utility addendum that might override the base lease language? Also look for any CAM reconciliation statements from prior years.
This is why I always tell clients to demand separate metering language in their lease negotiations. Down here with Alabama Power, we see landlords trying to allocate common area usage to tenants all the time. If the tenant has their own meter, there's no argument. But when it's a master meter situation, you need to scrutinize every line item on those utility bills.
Check the reconciliation methodology too. In San Antonio, I caught a landlord charging tenants for utility deposits, late fees, and even disconnection charges from CPS Energy. Those aren't legitimate operating expenses that should be passed through. The $8,400 monthly bill - is that just electricity or does it include water, gas, trash? Make sure you're getting a breakdown of all utility accounts.
Ed and Angela - great points. I requested all utility bills for the past 3 years and found the landlord has been including the security deposit charges and even a $450 late fee from last August. The lease clearly states tenant pays for "actual utility costs" not penalties. Looks like we've got about $15,000 in overcharges just from the improper allocations, plus another $2,800 in fees that shouldn't have been passed through.
Marcus, that's a solid recovery. Here in Newark with PSE&G accounts, I always look for seasonal adjustments too. Some landlords will charge tenants based on peak summer usage even during winter months when the building's load is much lower. Did you analyze the monthly kWh usage patterns to make sure the allocations match actual consumption periods?
This thread is gold. Bookmarking for future reference. We deal with Seattle City Light master meter situations constantly up here, and the seasonal allocation issue Tony mentioned is spot on. I've recovered over $30K for one client just by proving the landlord was using December heating loads to calculate June allocations. The devil is always in the details with these pass-through audits.
Final update: Landlord agreed to reimburse $17,800 and correct the allocation methodology going forward. They'll now allocate based on actual square footage occupied (40%) rather than trying to pass through 100% of utility costs. Thanks everyone for the advice - this forum is invaluable for these complex lease audit situations.