Need advice on commercial property Utilties.

[Chris H.]

Hello BP community,

I need some advice on handling escalating utility bills. My previous office manager really let things slide on my 30k sqft office complex. We have 60 tenants with 6 in lease. Thats right, the office manager had not renewed leases in the past few years. Our leases were a gross lease with utilities included. This has become a problem. It's time to write up new leases and I'm unsure on how to handle utilities.

Electric, gas, water and trash cost me ~80k a year. I'd like to move to a modified gross lease with tenants paying utilities. The problem is most units share electric meters. The water and gas meters are one per building. We have 25+ electric meters which include meters for community lighting and AC.

What are some methods to divide up the Utility costs?

• Add sub meters for each unit. I'm not sure this would work as our electric meters are on a rate schedule that I do not believe can be legally submetered.
• Take the previous years utility costs from all the meters and charge it by sqft. At the end of the year charge/refund the difference in the actual charges.
• Use the previous method but break out utilities for the units on each shared meter instead of the total cost for all meters.
• Break up each bill as it arrives. and divide it by units on the meter This would add a lot of overhead to the work load.

For water, gas and trash service I think it would be acceptable to share the costs based on sqft. I just dont know what the common practice is and my experience isn't in commercial offices. On the residential side of my business we are master metered and submeter 400 tenants. Any advise would be greatly appreciated. Thank you, Chris

[Mark Creason]

Originally posted by @Chris H.:

Hello BP community,

I need some advice on handling escalating utility bills. My previous office manager really let things slide on my 30k sqft office complex. We have 60 tenants with 6 in lease. Thats right, the office manager had not renewed leases in the past few years. Our leases were a gross lease with utilities included. This has become a problem. It's time to write up new leases and I'm unsure on how to handle utilities.

Electric, gas, water and trash cost me ~80k a year. I'd like to move to a modified gross lease with tenants paying utilities. The problem is most units share electric meters. The water and gas meters are one per building. We have 25+ electric meters which include meters for community lighting and AC.

What are some methods to divide up the Utility costs?

• Add sub meters for each unit. I'm not sure this would work as our electric meters are on a rate schedule that I do not believe can be legally submetered.
• Take the previous years utility costs from all the meters and charge it by sqft. At the end of the year charge/refund the difference in the actual charges.
• Use the previous method but break out utilities for the units on each shared meter instead of the total cost for all meters.
• Break up each bill as it arrives. and divide it by units on the meter This would add a lot of overhead to the work load.

For water, gas and trash service I think it would be acceptable to share the costs based on sqft.

I just dont know what the common practice is and my experience isn't in commercial offices. On the residential side of my business we are master metered and submeter 400 tenants. Any advise would be greatly appreciated.

Thank you,

Chris

You could go to NN or NNN leases, where the tenants would split all of the cam charges. Even with one meter, you would just split it as a share per sf.

Mark