Separately metering utilities is an effective way of adding value to both multifamily and commercial properties. However, disputes often arise when properties are not metered properly. The legal implications often lead to landlords becoming responsible for the utilities and ultimately must have the utilities transferred into their name. Landlords must recognize their responsibilities as it pertains to metered utilities and have a good understanding of how properties are metered before acquiring them, confirm that properties already owned are metered correctly and make sure that when separately metering utilities in buildings already owned the work is done properly.
A recent decision handed down by the Commonwealth Court of Pennsylvania in 1-A Realty v. Pennsylvania Public Utility Commission demonstrates why landlords must understand their rights and obligations associated with metered utilities. As this case illustrated, failure to abide by state regulations may result in additional expenses incurred by property owners.
1-A Realty owns and manages Red Maple Acres, a mobile home community located in Lower Macungie Township, Pa. At the time, the community streetlights were metered in conjunction with a maintenance garage located on the property and the wiring was run underground from the garage to the communal streetlights.
The electrician responsible for installing the lights failed to mark the location of the wires. Consequently, the wiring was cut by tenants as they moved their mobile homes to their respective lots. Although cutting the streetlight wiring was inadvertent, it became a reoccurring problem.
In July 2009, safety concerns along with the costs of continually repairing the wiring led 1-A Realty to rewire the lights to the electrical boxes of the mobile homes closest to the streetlights. In total, 21 homes were outfitted with additional breakers responsible for providing the electricity to power the communal streetlights.
1-A Realty conducted an independent study based upon the metered usage measured at the maintenance garage previously responsible for the street lighting and concluded the mobile homes responsible for the increased electrical load would incur additional costs ranging from $6.54 to $9.67 each month. 1-A Realty provided a monthly rent discount of $10 to the affected tenants to compensate them for the additional electric expense not agreed upon in their lease agreements.
A month after the breakers were installed, two residents of the Red Maple Acres community contacted PPL, their utility provider, to determine whether the $10 rent discount covered the cost of the streetlight usage. The residents were not interested in having their electrical account placed in 1-A Realty’s name. They were merely determining whether they were being fairly compensated. Shortly after inquiring about the actual costs of the increased electrical usage, the residents learned their accounts along with their outstanding balances had been transferred to 1-A Realty due to the fact their homes were not “individually metered.”
1-A Realty proceeded to turn off the breaker in each home responsible for supplying the electricity to the streetlights, and both 1-A Realty and the residents of the mobile homes responsible for bringing attention to the newly installed breakers instructed PPL to transfer the accounts back to the tenants’ names. Despite the breakers being turned off and no evidence of usage coming from the mobile homes, PPL refused to transfer the accounts out of 1-A Realty’s name.
1-A Realty filed a complaint with the Pennsylvania Public Utility Commission (PUC) against PPL pertaining to the accounts that remained in its name. Hearings were held before an administrative law judge who issued a ruling dismissing the complaints and directed PPL to transfer accounts for each of the residents of Red Maple Acres with streetlights attached to their residential electric boxes into the 1-A Realty’s name. 1-A Realty then appealed that ruling to the Commonwealth Court.
On appeal, 1-A Realty first argued that PUC erred by finding tenants are not permitted to accept utility service for common areas not part of their normal home usage.
Although tenants may only accept responsibility for utility services exclusive to their homes, this concept is based on the finding that their utilities are individually metered.
While the phrase “not individually metered” is not defined in the Public Utility Code or by PUC’s regulations, as the court pointed out, the phrase has repeatedly been interpreted by the PUC as having foreign wiring or registering use not exclusive to the dwelling or its occupants. In other words, as long as the dwelling in question contains foreign wiring, the dwelling cannot be treated as individually metered even if the foreign wiring is not registering any usage.
The court believed that 1-A Realty was responsible for maintaining the accounts in its name since the homes were not individually metered. In doing so, the court noted that electrical usage was interrupted by turning off the breakers in each of the homes outfitted with breakers connected to the public lighting and the breakers and the wiring remained in each of the homes.
1-A Realty next argued that the tenants never requested that their accounts be transferred into the owner’s name and 1-A Realty immediately turned off the breakers responsible for the streetlights, and a result thereof, the accounts should have been transferred back into the tenant’s names.
The Commonwealth Court stated that the Public Utility Code does not allow tenants to enter agreements with landlords to have utilities remain in their names when the utilities are not separately metered. As such, once PPL became aware foreign wiring was present, the court held that the utility provider was required to transfer the accounts to the property owner’s name.
1-A Realty’s last argument was based upon the notion that PPL was not permitted to transfer the remaining 19 accounts, whose electrical boxes contained a breaker connected to the street lighting, into the property owner’s name because those homes were not part of the dispute.
Under 66 Pa. C.S § 1529.1, “any owner of a residential building or mobile home park failing to notify affected public utilities as required by this section shall nonetheless be responsible for payment of the utility services as if the required notice had been given.”
Since there was no dispute that foreign wiring remained in each of the 21 homes, the court ruled that PPL was required to automatically transfer the accounts at issue into the name of the property owner until 1-A Realty permanently removed the wiring from all of the homes.
While the Commonwealth Court’s ruling does not change the law in any way, it offers a reminder to landlords to properly meter their units. Had 1-A Realty taken the time to understand its rights and obligations associated with metering utilities, and metered the communal lights correctly, it could have avoided the account transfers, the cost of removing the wiring from each of the affected homes, and the costs associated with rewiring the streetlights properly.
Alan Nochumson is the sole shareholder of Nochumson P.C., where his law firm’s primary practice areas consist of real estate, litigation, labor and employment, land use and zoning, and estate planning. He is also president of Bear Abstract Services, where his title insurance company offers comprehensive title insurance, title examination and closing services. He can be reached at 215-399-1346 or by email at email@example.com.
Stuart Udis, a student at Widener University School of Law, assisted in the preparation of this article.