Utilities and Services

What this clause does

In industrial leases, the tenant pays for its own electricity and janitorial service, and usually its gas, water, sewer, trash and telecom as well. The reason is practical: every industrial user consumes differently, so landlords do not try to predict or bundle it. In a single-tenant building you typically hold the accounts directly. In a multi-tenant park, some services may be shared and allocated, so ask how.

The clause also addresses interruptions. Most forms say the landlord is not liable when service fails for reasons outside its control, such as utility outages, accidents, strikes or public safety shutoffs, and that rent is not reduced while service is down. For a cold storage operator, a manufacturer or a fulfillment center running automation, that allocation of risk matters.

Where a landlord pays a shared bill, such as water on a single meter serving several buildings, it typically allocates the cost by square footage or estimated use and bills it with operating expenses. If your use is light and a neighbor's is heavy, that allocation works against you. Ask to see the method.

Capacity is the real question

The first question most tenants ask is whether the building has enough power. It is your job to answer it, not the landlord's, because the need is specific to your business. Build a spreadsheet of every machine, charger and system with its electrical requirements, and have a commercial electrician review it against the building's amperage, voltage (120/208 versus 277/480) and phase before you sign. Plan ahead for forklift battery or lithium charging, EV fleets, automation and robotics, and climate-controlled areas.

Upgrading service is expensive and slow. It runs through the local utility's process, and underground service may mean trenching through landscaping, parking and sidewalk before new panels and switchgear go in. Timelines can stretch well past a year. As buildings get larger and terms get longer, an upgrade becomes easier to justify, but you need to know early. Lighting is the other side of the power equation. If the warehouse still has older fixtures, ask whether the landlord will convert to LED as part of the deal, since the savings on your bill and the utility rebates can make it an easy concession.

Do not overlook water and gas. Water line size and pressure affect fire sprinklers and food production, and some processes need clarifiers or have discharge limits. Gas service matters for warehouse heaters and some manufacturing.

Outages and interruptions

Because most forms deny rent relief for interruptions, consider two requests. First, rent abatement if service is interrupted for more than a few consecutive business days because of something the landlord did or controls, such as a repair it undertook. Second, a termination right if a prolonged interruption makes the premises unusable. Separately, secure the right to install a backup generator. You will need a location near the power panels, a pad and possibly an enclosure the city requires, and you should keep it clear of dock doors and truck circulation. Confirm the generator, its fuel storage and any transfer switch are approved in the lease, not left for a later request.

Think beyond the lease, too. In California, utilities may shut off power during high fire danger, and heat waves strain the grid. For cold storage, pharmaceuticals or an automated fulfillment operation, a few hours without power can mean spoiled inventory or missed shipments. The lease will rarely cover that loss, so confirm what your business interruption insurance and your generator plan actually protect.

What to negotiate

Ask the landlord to confirm the existing electrical service in writing and to cooperate with the utility, including granting easements, if you upgrade. Get approval in the lease for your generator, charging equipment and any solar, and settle whether they stay or go at the end. In multi-tenant buildings, ask for separate meters or a fair submetering method. Confirm who holds each account at move-in and move-out so service is never cut off during the transfer, and ask for the last twelve months of utility bills to budget realistically. Have a real estate attorney review the final language.