By Liad Hadar – Director
This article first appeared in Asset Magazine’s August 2025 edition

In today’s property market, some of the most heated disputes I see as a landlord’s attorney have nothing to do with rent, structural issues or interpretation of insignificant clauses in the lease agreement.

They’re about electricity.

Over the past few years, rising tariffs, load-shedding, municipal mischarges, backup generators and solar installations have turned electricity billing into a complicated and often mistrusted aspect of the landlord-tenant relationship.

What should be a straightforward cost recovery exercise has, in many cases, become the source of deep suspicion, strain and even the breakdown of otherwise solid commercial relationships.

The good news? These disputes are common and avoidable if handled with clarity, transparency and the right supporting systems.

Where the Sparks Start to Fly

Electricity consumption disputes almost always come down to one of three things:

• Vague lease provisions — where the agreement is silent or ambiguous about how electricity is billed, how tariffs are determined or whether there is any markup allowed.
• Metering issues — whether due to inaccurate readings, faulty equipment or lack of trust in the meter reading company’s independence.
• Unexplained charges — tenants receive statements they cannot reconcile with their actual usage, especially when bulk tariffs, common area consumption, or generator fuel costs are involved.

Layer onto that the complexity of South African municipal tariffs, seasonal rate changes and the relatively new challenge of incorporating solar and other energy saving and backup systems and it’s no surprise that misunderstandings arise. Unfortunately, once trust is eroded, even small discrepancies can escalate quickly.

It Starts with the Lease

A well-drafted lease agreement is your first line of defence. It must:

• Clearly define how consumption will be measured and billed.
• Specify whether the landlord is entitled to recover only actual costs or whether a margin is permitted.
• Outline how and when tariffs can be adjusted, for example, in line with municipal increases.
• Clearly define the common area space, the tenant’s contribution percentage toward it and the treatment of common area usage.
• Deal with backup power and alternative energy costs.

If a lease simply states “tenant to pay electricity charges as invoiced by the landlord” without further detail, you’re setting the stage for future conflict. Ambiguity leaves too much room for interpretation and disagreement.

In my experience: Ambiguity + Disagreement = Hostility.

The Meter Reading Company – Ally or Liability?

The company that reads and reports your consumption data is often the forgotten player in this story, until something goes wrong.

Your choice of meter reader matters.

A credible, independent and professional metering service not only provides accurate readings but also presents them in a clear, accessible format that tenants can understand without needing a lawyer or, worse, a high-level electrical engineer!

The more transparent and itemised the data, the less room there is for suspicion or disagreement.

Conversely, if tenants feel the metering process is opaque or biased in the landlord’s favour, you’ve got a problem before you’ve even started explaining the charges, even if you’re clearly in the right.

Simplicity is Your Friend

This is an area where overcomplication kills trust.

Lease clauses should be drafted in plain and concise language. Tenant statements should be easy to trace from the meter reading to the amount billed. It would also be beneficial if any adjustments, for example, a seasonal tariff change, is explained in writing at the time they occur or prior to entering into the lease.

If you (or your meter reading company) cannot explain the calculation on a single page, you probably need to rethink your billing process.

The Transparency Factor

In electricity billing, secrecy is your enemy.

Tenants should be able to easily view historical meter readings, verify their own meter if they choose and understand any non-consumption charges, such as backup generator fuel or solar infrastructure costs.

Landlords who proactively communicate tariff changes, publish meter readings and invite tenant verification often find that disputes drop dramatically, even if the actual charges don’t change.

The Million Dollar Question – Can a Landlord Make Profit on Electricity?

This is one of the most contentious questions I’m asked and its worth its own article, not just these few paragraphs.

In most commercial leases, electricity recovery is treated as cost recovery, meaning you’re entitled to recover what you’ve paid, but not to make a margin. That said, there are circumstances which would allow a landlord to profit on the selling (and recovery) of electricity.

Cliff hanger- next month’s article will deal with this in more detail.

Protecting the Relationship Protects the Asset

Electricity billing should never be the reason a good tenant walks away from a lease.

Yet time and again, I’ve seen relationships deteriorate unnecessarily over disputes that could have been avoided with clearer drafting, better systems and transparent communication.

The formula for avoiding these disputes isn’t complicated:

• Draft clear, detailed lease provisions.
• Appoint a credible meter reading company.
• Keep billing simple and transparent.
• Disclose everything and trust your systems as a landlord.

Do that and you’re not just avoiding conflict, you’re building the kind of trust that keeps tenants in place, avoids disputes, protects cash flow and ultimately preserves the value of your asset.

In an industry where tenant relationships are as important as the bricks and mortar, that’s worth far more than a disputed electricity bill.