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.

"If there is a mechanism that allows the increase to be passed on sooner, that's best, because it's easier for small businesses to pay in smaller incremental amounts," says Dave Hamilton, vice president of commercial property management for Norris & Stevens and chair of BOMA's energy deregulation committee. "Otherwise, the situation could force them into default or to layoff more people, which would further hurt the economy."

Melvin Mark Cos. vice president Pat Schreck says his company also is making similar changes in its lease forms. As well, he says for full-floor users in suburban office buildings his company is now quoting full-service rents net of electricity.

Although they aren't the majority, the real problems will hit building owners who, because of the strong economy, have not yet included operating pass-through clauses into their leases, says Hamilton. Even if they changed over recently, they still likely have several long-term leases out there and no mechanism to make the tenant pay for the increasing electricity costs.