Can I charge rising energy prices to my tenant?

1. Consumption costs in case of residential lease

In a residential lease it is usually provided that the tenant takes care of his own energy subscription.

When this is not the case, there are two possibilities: either the tenant pays a commission (which is settled with the actual consumption costs) or the tenant pays a lump sum (which remains the same over the entire length of the agreement, regardless of the actual consumption costs).

Unless the agreement expressly provides that the charges imposed on the tenant are fixed amounts, they are presumed to be equal to the actual expenditure.

In accordance with both the (old) Leasing Law and the (new) regional Leasing Law in Flanders, Brussels and Wallonia, each party can at all times ask the court to review the costs and charges, even if they are fixed, or to convert them into actual costs and charges. This is only not possible if a fixed cost is explicitly provided for.

The judge then rules on the basis of the development of the actual expenses and determines from when the revision or conversion becomes effective.

Of course, nothing prevents the parties from making amicable arrangements which can be added to the lease in the form of an addendum.

2. Consumption charges in case of commercial rental

The Commercial Leasing Law does not provide anything for passing on charges and costs.

It is therefore up to the landlord and tenant to make agreements on this when entering into the commercial lease.

Like the case with residential leases, the lease usually stipulates that the tenant is responsible for taking out his own subscriptions and for the common costs of the building, a provision or a fixed amount is provided.

In the event of an increase in energy prices, a distinction must be made between the commercial lease with payment of a commission and the commercial lease in which a lump sum is paid.

2.1  The commercial tenant pays a commission

The purpose of a provision is to divide the annual statement into monthly parts in order to avoid overcharging at the end of the year.

The Civil Code stipulates that also the imposed costs and charges determined in "fixed amounts" must correspond to the actual expenses.

If it is already known today that the commission will no longer be satisfactory, as a landlord you should write to your tenant to invite him to increase the commission by the same amount as that charged to you.

2.2 The commercial tenant pays a fixed amount

If lump sums are charged, it is more difficult to pass on a price increase. In this case, the parties have agreed to a fixed amount regardless of the actual consumption or the actual settlement.

Contrary to residential rental, the Commercial Leasing Law does not provide for a possibility to change the fixed amount.

However, the Commercial Leasing Law does provide the possibility of having the rent reviewed by the court. And therein lies a hidden solution. In our opinion, a flat rate for utility consumption can be considered as part of the rent. Under the condition of rent review within the Commercial Leasing Law, the flat rate could therefore be changed.

The disadvantage, however, is that a rent review cannot be requested at all times and is subject to certain conditions and deadlines.

But beware: you can include a special clause in your lease agreement that makes a revision of the fixed sums possible under certain circumstances.

3. Rental charges in the case of an office lease

Office leases have not been given a legal definition and are therefore subject to the common Leasing Law (federal jurisdiction) provided for in the Civil Code.

However, this common law regime is in principle suppletive, which means that the parties can agree to derogate from it. There is therefore considerable contractual freedom and flexibility in this area.

The parties may agree that the tenant pays a provision of charges or a lump sum. The provision of charges is then set off against the actual consumption costs, usually on production of the annual consumption statement by the landlord. The lump sum on the other hand will in principle remain the same for the entire duration of the agreement, irrespective of the actual consumption costs.

The parties may also agree that the tenant will open own individual accounts for his personal consumption and pay a lump sum or provisional amount for the common charges.

It is important to note that the Civil Code stipulates imperatively (without the possibility for the parties to provide for contractual provisions to the contrary) that when the parties have agreed that the charges imposed on the tenant are fixed provisionally, they must correspond to real expenses. These charges must be mentioned separately from the rent and the documents establishing these expenses must be produced.

In the case of multi-tenant buildings managed by the same person, the obligation is fulfilled if the landlord sends the tenants a statement of costs and charges.

The parties may also provide contractual clauses allowing a revision of the amount of the provision in order to adapt it to a possible increase or decrease in the energy price, as well as for flat-rate charges.

If no such clause has been provided for, a unilateral change in the amount of the flat-rate charges can only be considered by mutual agreement or, failing that, by submitting the matter to the competent Justice of the Peace. The parties may also have recourse to mediation in order to try to reach a common ground allowing them to modify their contract by mutual agreement.

4. Conclusion

We hope that the present article will enable you to take proactive action and avoid surprises, but above all unpaid costs.

It is especially important that you know that you can add certain clauses to your lease agreement that allow for the adjustment of certain agreed amounts to price increases.

These clauses present an undeniable advantage in that they significantly facilitate the possibility of adapting the charge rates to real energy prices, which can benefit both the landlord and the tenant.

Of course, we're happy to help. Please do not hesitate to contact the specialists at Seeds of Law, on +32 (0) 474 40 07 or via info@seeds.law.