Topic No. 325: Utility Passthroughs
Where a landlord pays for gas, electricity and/or steam provided to the tenant’s unit and/or to the common areas of the property, the landlord may recover the increase in the cost of these utilities from the tenants in the form of a utility passthrough. A utility passthrough is a dollar for dollar passthrough to the tenants of any increase in the landlord’s costs for utilities based on a comparison of utility costs from one calendar year, known as the “base year”, to the most recent calendar year, known as the “comparison year.”
Before calculating a utility passthrough, the landlord must determine the tenant’s base year. Different tenants in the same property may have different base years, depending on when they moved into the property. In general, a tenant’s base year is the year before the tenancy began. However, base years are re-set every five years, so a tenant’s base year will change over time.
From November 1, 2004 through December 31, 2008, the landlord was required to file a Rent Board petition for approval of every utility passthrough. Beginning January 1, 2009, the landlord is required to file a petition only where the landlord is comparing utility costs for the two most recent calendar years. For all other base years, the landlord is only required to file a Utility Passthrough Calculation Worksheet form with the Board.
There is a specific method for calculating a utility passthrough that must be followed in order for the passthrough to be valid. The method for calculating the utility passthrough is detailed in the Rent Board’s utility passthrough petition and worksheet forms. The calculation methodology is the same whether the landlord uses the petition or worksheet to calculate the passthrough.
Where a petition is required, the Rent Board will mail a copy of the petition to the tenant and the tenant will be given the opportunity to file written objections to the petition, if any. The petition will then be reviewed by an Administrative Law Judge and decided without a hearing unless the Administrative Law Judge determines that a hearing is required. If the petition is approved without a hearing, the landlord and tenant will receive a written decision in the mail approving the utility passthrough. If a hearing is required, the parties will receive written notice of the hearing date and time, and a written decision will be issued after the hearing.
Where a worksheet is required instead of a petition, the Rent Board will not mail a copy of the worksheet to the tenant. However, the landlord must give a copy of the worksheet to the tenant with the notice of rent increase, after filing the worksheet with the Board. The Rent Board will review 10% of all worksheets filed with the Board to determine if the passthrough is correctly calculated. If the Board determines that a hearing is required, the parties will receive written notice of the hearing date and time.
Every petition and worksheet must be filed with the Rent Board before giving the tenant a legal notice of rent increase for the utility passthrough. Where a petition is required, the tenant does not have to pay the utility passthrough until a Rent Board Administrative Law Judge renders a written decision that orders the tenant to pay it. However, any utility passthrough that is granted will be retroactive to the effective date of a valid notice of increase. Where a worksheet is required, the utility passthrough is due on the date specified in the notice of rent increase.
The utility passthrough does not become part of the tenant’s base rent and must not be included in the rent when calculating an annual or banked rent increase. A utility passthrough can only be imposed at the same time as the annual allowable increase and applies only for the 12-month period after it is imposed. After 12 months, the utility passthrough must be discontinued. If the utility passthrough is not discontinued after 12 months, the tenant can file a petition at the Rent Board alleging an improper utility passthrough and seeking a refund of overpayments.
If payment of a utility passthrough would present a financial hardship for a tenant, he or she may seek relief from payment of the passthrough by filing a Tenant Financial Hardship Application with the Rent Board. A Tenant Financial Hardship Application must be filed within one year of the effective date of the utility passthrough. The tenant must wait to file the Hardship Application until the tenant has received a rent increase notice, a Utility Passthrough Calculation Worksheet or a Rent Board decision. Once the tenant has filed the Hardship Application, the tenant does not have to pay the utility passthrough unless the Rent Board issues a final decision denying the Hardship Application. If the Hardship Application is denied, the tenant will have to pay the utility passthrough retroactive to the date indicated in the rent increase notice. If the Hardship Application is granted, relief from payment of the utility passthrough may be for an indefinite period or for a limited period of time, depending on the nature of the tenant’s financial hardship.
For more information, you can also read Fact Sheet 9, “Utility Passthroughs.” To obtain a copy of the Petition for Approval of Utility Passthrough, the Utility Passthrough Calculation Worksheet, the Tenant Financial Hardship Application form, and/or Fact Sheet 9, you can visit the Forms Center on our website at www.sfrb.org. These forms are also available at the Rent Board’s office.