I picked up a strip mall client in suburban Dallas — 12 tenant spaces, all on Oncor delivery with various REPs. The landlord manages the common area meter and passes through utility costs via CAM charges. The tenants think they're being overcharged but don't know enough to prove it. Who do I work with here — the landlord, the tenants, or both? And who signs my engagement letter?
Strip mall audits — working with landlords vs tenants
This gets tricky fast. In my experience, you want the landlord as your client if you can get them. They control the common area meter and they have the most to gain from rate corrections on that meter since it's usually the biggest one on the property. If individual tenants approach you, you can audit their individual meters but you won't have access to the common area data without the landlord's cooperation. I did a strip mall in Marietta on Georgia Power where the common area meter alone was overcharged by $1,800/month due to a wrong rate schedule. That was all landlord money.
The landlord vs tenant question comes up constantly in commercial lease situations. Here's my recommendation: approach the landlord first. Explain that you can audit both the common area meters and help verify that tenant pass-throughs are calculated correctly. Most landlords want to keep their tenants happy, and showing them that CAM charges are accurate (or finding savings) is a win for the landlord-tenant relationship. Your LOA should come from the property management company or the landlord's authorized representative. For individual tenant meters, you'll need separate LOAs from each tenant, which is more work but can be worth it on larger properties.
I've done about 20 strip malls and small shopping centers. One pattern I see constantly: the landlord installed a master meter years ago and the tenants are being billed at whatever rate the landlord negotiated, but nobody has checked whether that rate is still the best option. Had a center in Phoenix on APS where the landlord was on an old E-32 rate that was grandfathered. Switching to E-32 TOU saved $900/month across the common area meters. The landlord used that savings to reduce CAM charges and three tenants renewed their leases early because of it.
This is incredibly helpful. I'm going to approach the landlord first. The common area meter angle is perfect because the landlord sees the direct benefit. Thanks for the advice.