If You Are Converting Commercial Space to Multi-Tenant Units, You Need to Understand Laws Related to Utility Billing  

Pullman & Comley Energy attorneys Frederic Lee Klein and Kathryn E. Boucher authored a New England Real Estate Journal (NEREJ) article examining the legal and practical challenges associated with converting underutilized commercial properties into multifamily residential housing in Connecticut, with a particular focus on utility and billing considerations. They explain that while these conversions are being encouraged to address the state’s housing shortage, developers must navigate significant infrastructure differences, because commercial and hospitality buildings are not designed for the individual utility metering required in residential settings. As projects often require extensive upgrades, including new wiring, piping, transformers, and metering systems, which can significantly impact timelines and budgets.

In the article, Fred and Kate highlight Connecticut’s strict legal framework governing utility billing in multi-unit properties. They note that the Connecticut Supreme Court recently confirmed that Ratio Utility Billing (RUB), which allocates utility costs among tenants based on formulas such as square footage or occupancy, is not permitted. "Instead, landlords may either estimate utility costs upfront and recover them as a fixed component of a tenant’s lease payment," they explain. Each approach carries trade-offs, from exposure to fluctuating utility costs under fixed-rent structures to the expense and regulatory complexity of installing new metering systems. Fred and Kate further explain that sub-metering, while offering more precise cost allocation and potential efficiencies, particularly when paired with on-site renewable energy, requires compliance with detailed Public Utilities Regulatory Authority regulations and an extensive application process.

To read the full article, please visit the NEREJ website.