Electricity Rate Hike Prompts New Lease Provisions

PORTLAND-The upcoming spike in electricity rates is prompting changes in full-service lease contracts. A full-service lease, used primarily for multi-tenant office buildings, is one that charges a flat rate that includes rent, janitorial, electric, gas and maintenance.

The local Building Owners and Managers Association, which produces standard leases that many building owners use, has long included a pass-through clause that allows for unexpected expenses to be passed on to tenants at the end of the year. Tenants pay a monthly amount based on a base year, and at the end of the year if it wasn’t enough to cover costs, the increased costs are divided up among all tenants on a per sf basis.

But BOMA fears that may not be enough given the expected 100% jump in electricity rates this fall due to the energy crisis and potentially another doubling if deregulation isn’t delayed from its Oct. 1 implementation date. As a result, says BOMA executive vice president Robin White, a provision is being added that allows a building owner to increase the monthly fee beyond the base year so that the building owner doesn’t have to carry the extra cost until the end of the year and the tenant doesn’t get hit with a huge, unexpected bill.