Get Tenant Cooperation to Save on Utility Costs

April 30, 2003

Skyrocketing utility costs have become a major concern for building and center owners. As a result, many owners are trying to get their tenants to conserve energy. In theory, tenants should be in favor of energy conservation because utility cost increases lead to increases in operating expenses and CAM costs. But in practice, tenants can be difficult—they don't want to do anything that interferes with their business.

Skyrocketing utility costs have become a major concern for building and center owners. As a result, many owners are trying to get their tenants to conserve energy. In theory, tenants should be in favor of energy conservation because utility cost increases lead to increases in operating expenses and CAM costs. But in practice, tenants can be difficult—they don't want to do anything that interferes with their business.

How can you ensure that a tenant will conserve energy? Los Angeles attorney Pamela L. Westhoff has this advice: Set out the tenant's energy conservation responsibilities in language you add to the lease or to your building's or center's rules and regulations. This gives the tenant an incentive to meet its responsibilities. They're listed in a Model Lease Clause (see p. 5) that you can adapt and use in your leases or in your building's or center's rules and regulations.

List Tenant's Energy Conservation Responsibilities

Set out the following tenant responsibilities in your leases or your building's or center's rules and regulations:

Encourage cooperation. Have the tenant agree to cooperate with your efforts to ensure that the building or center operates efficiently, advises Westhoff [Clause, par. a]. As part of this cooperation, require the following:

  • * No waste of utilities. Bar the tenant from wasting your building's or center's utilities, notes Westhoff. If you don't stop the tenant from wasting utilities—such as leaving lights and equipment on after hours, when no one is in the tenant's space, your efforts to control utility costs and usage will be undermined, she warns [Clause, par. a(i)]. Although it's difficult to enforce this prohibition, cautions Westhoff, it may give the tenant an incentive not to be wasteful.

  • * No obstruction of systems. Require the tenant not to obstruct or tamper with your heat, ventilation, and HVAC systems, says Westhoff [Clause, par. a(ii)]. Otherwise, these systems won't run efficiently, she explains. For instance, say that the tenant must:

  • Not place furniture in front of any vents, because furniture could block air flow to or from the heat, ventilation, and HVAC systems, making them work harder and use more energy [Clause, par. a(ii)(A)];

  • Not change the thermostats in the building or center, because those changes could cause the heat and HVAC systems to work harder and use more electricity [Clause, par. a(ii)(B)];

  • Keep corridor doors closed and not open any windows unless the air circulation is off. This stops heat and cooled air from escaping from the space, building, or center [Clause, par. a(ii)(C)]; and

  • During hot months, lower or partially close window blinds if the sun is shining through the windows. This stops the sun from heating up the space [Clause, par. a(ii)(D)].

Require compliance with mandatory energy program. You may decide now or in the future to set up a formal energy conservation program in your building or center. Or a local utility company may set up a similar program that will affect your building or center. So cover the following three points in your lease or rules and regulations, suggests Westhoff:

  • You have the right to set up mandatory programs, including energy conservation programs, that you believe—in your sole judgment—are in the best interests of the building or center.

  • A utility company may also establish mandatory conservation programs.

  • The tenant must promptly comply with any obligations you or the local utility company set for the mandatory programs [Clause, par. b].

Your tenants shouldn't have a problem complying with mandatory programs, as long as they're applied fairly, notes Westhoff.

Practical Pointer: An alternative for owners is to set up voluntary energy conservation programs—rather than mandatory ones—to control utility costs, comments Westhoff. She has found that tenants typically are receptive to these voluntary programs.

CLLI Source

Pamela L. Westhoff, Esq.: Partner, Piper Rudnick LLP, 1999 Ave. of the Stars, 4th Fl., Los Angeles, CA 90067-6022; (310) 595-3053.

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