A net of electric lease is a leasing structure in which tenants pay for their electic utilities separately from their rent. This is similar to a triple net lease, but landlords still cover the costs of taxes, insurance, and other utilities. The most effective way to implement a net of electric lease is to submeter tenant spaces or each tenant can pay for a certain percentage of the building, which is sometimes referred to as a modified gross lease.
Why it Matters
When tenants have their rent included, they have very little incentive to reduce their energy consumption. However, net of electric leases motivate tenants because tenants pay for exactly what they consume, and when they make an effort to waste less they will realize the results of their efforts through lower utility bills. Another option is to split the building by space; so, if a tenant occupies 10% of the space in a building, the tenant will pay 10% of the total bill. This option is less motivating because tenants end up paying for their neighbor’s consumption as well and do not receive the full benefits of their energy conservation measures.