A little more than a year after Ratio Utility Billing (RUB) was declared illegal by the Connecticut Supreme Court, some landlords are still using it. Moreover, some billing vendors are still advertising RUB billing for Connecticut clients. What is the status of RUB billing in Connecticut and what can landlords do to avoid violating the law?
As recognized in the recent Connecticut Supreme Court decision in Northland Investment Corporation v. Public Utilities Regulatory Authority, under a typical RUB method, a landlord pays the utility company directly for its building’s entire utility bill and then recoups the cost from tenants in the form of a variable utility payment each month. Under this form of billing, the landlord typically bills each tenant directly for the tenant’s "proportionate share" of utilities based on factors it has chosen, such as a unit’s square footage, number of occupants, number of bedrooms and bathrooms, or a combination of these. This method of utility billing is typically included in a provision of the plaintiff’s lease agreements. However, in Northland the Connecticut Supreme Court ruled that RUB billing for residential multiunit properties is illegal under Connecticut law. Instead, the Court held that landlords may either (i) estimate utility costs upfront and recover them as a fixed component of a tenant’s lease payment, or (ii) use submetering approved by the Public Utilities Regulatory Authority (PURA).
In the Northland case, the court agreed with the Public Utilities Regulatory Authority (PURA) that billing residential tenants for utilities on the back end (i.e., each month after the bill is paid by the landlord) is prohibited but that forecasting in advance what a unit’s yearly utility usage will be and building that figure into the monthly rent at the time a lease is signed, does not violate the statute. Alternatively, the landlord may apply to PURA seeking permission to submeter and bill for utilities based upon individual tenant’s usage.
Generally, therefore, owners of multiunit buildings in Connecticut may only collect utility charges from residential tenants by (1) submetering under a PURA-approved submetering plan, or (2) building cost recovery for utility services into the price of rent charged to units that are not individually submetered. Notably, while Northland focused on residential properties, PURA has broadened this ruling to implicate both residential and commercial properties. Broadening the Supreme Court’s interpretation is potentially subject to challenge.
[View source.]
