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  1. #1
    Join Date
    Jun 2011
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    Default Commercial Lease Electric Overage Charge

    My question involves a consumer law issue in the State of New York

    When we renewed our commercial lease in 2008, our landlord added an addendum that we were being given an allowance of 12,000 KWH per month and any overage would be billed at the prevailing rate of .07. They installed meters (no other tenants have meters) attached to our space in a large office park building in March 2011. In April we received notice that there was no overage and we would not be billed. In May we received a bill showing an overage of 4,600 KWH and we were billed at .07. They provided copies of the bills from the utility and it clearly shows the rates are .035 (for the space classified as Small Commercial) and .0416 (for the space classified as Large Commercial). We paid the overage at the rate indicated on the bill (aggregate at .0467 including a PPC surcharge, and NYS tax).

    The landlord is insisting that we pay the additional $91 because the contract states .07, regardless of what the actual rate they paid for the overage was.

    We believe this to be a case of unjust enrichment because the landlord was not truthful in stating what the prevailing rate that was being charged for our leased space utilities at the time the contract was signed. The verbal agreement when the contract was drawn up was that we would reimburse at cost; they misrepresented what the cost was.

    They are also claiming they intend to recoup the overages going back to September 2008 when the addendum was signed, even though there were no meters and no possible way for them to know what electrical use was ours and what was other tenants or exterior common area fixtures. They claim they can use the current overage as an estimate and bill that amount times 30 months (about $10,000).

    Other mitigating factors that influence the utility use in our leased space (weather, equipment use, equipment changes, etc.) would make an across the board average inequitable.

    Is it legal for the landlord to set the rate at which they bill the utility overage? I would think NYS would regulate against landlord profiteering.

    Do we need to just pay the .07 or continue to dispute it?

  2. #2
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    Default Re: Commercial Lease Electric Overage Charge

    The prevailing rate at the time you entered into the lease and agreed to the .07 rate was what? If it was not .07, why didn't you raise the issue at that time? You're not a residential tenant - courts regard you as sufficiently sophisticated to understand what you're agreeing to do when you enter into a contract. It's perfectly reasonable for a landlord to assert a fixed rate for overages, despite the fact that prices will fluctuate, as it simplifies calculation of overages - and guess what: it also protects you if prices go up.

  3. #3
    Join Date
    Jun 2011
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    2

    Default Re: Commercial Lease Electric Overage Charge

    The prevailing rate at the time was the same as it is now. .035 (small commercial) and .041 (large commercial). I spoke with the director of the utility this morning and he was emphatic that the rates have never been close to the .07 and that the landlord would have been provided the expected rate information in writing, not verbally over the phone as they claim. The utility manager is sending me a written letter stating this and providing the rate information chart that is available to all commercial customers.

    We did not raise the issue at the time because we believed the landlord when he said he was paying .07 per KWH. He lied. He sat right at our conference table and misrepresented the actual cost. We specifically said we would pay the overage at cost and that is what was agreed to. Since he lied and misrepresented that the cost was double what he was being charged by the utility, you can understand that we are someone put off by his profiteering. We already pay over $100,000 US in rent each year. To nickle and dime for $300 a month in utility "overages" is disgusting, considering that when his grandmother owned the property, everything was well maintained and service was top notch. Since he and his brothers took over, you can't even get them to change a light bulb or fix a leaking toilet. They lost 1/2 of their tenants within a year of taking over, and that is why they added this 'overage' addendum. The other reason is that we have decided not to renew our lease with them. Rental values have dropped dramatically in our area, but they will not negotiate the rent. A building the next street over is at $3.50 a square foot for warehouse space. Our landlord wants $11.00 a square foot for unheated, no a/c, space that we've had to trap and remove racoons from twice, not to mention the mice, hornets and other bugs that make their way in. Why would we pay an additional premium of $7.50 for space that is less desirable? He has it in his mind that this is very valuable space because it is on the Erie Canal, but there is only one entrance that is on a very, very busy street and it is very difficult to exit the office park and can take a full 15 minutes or more to make a left-turn. The other issue is it is not convenient to an expressway. It is not the prime space he desires it to be. There is a lot of vacant space in the office park. The space we occupy was vacant for three years prior to our taking it back in 2004. Businesses are not clamoring for this location that isn't even visible from any major street. It is behind a bowling alley and a berm of trees.

    The landlord is simply a liar and a gouger, and knows us to have a reputation for honesty, so took advantage of that. We don't have a problem paying an overage we agreed to. We object to having been lied to about what the actual cost was. It had nothing to do with "simplified calculation". Rounding up to .05 would have been the simplified calculation of a rate spread of .035 to .041 factoring in historical rate increases (which have been in fractional cents, according to the utility manager). If you were selling someone an item in a store that cost .035, would you really just say, "just give me .07 cents to make it easier for me"?? Not very fair or honest.

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