Energy Clauses in Commercial Leases: Co-Tenancy, CAM, and Metering
By Illinois Commercial Energy editorial team
Reviewed by JakenEnergy commercial energy team
Energy is one of the larger operating costs in most commercial buildings, and the lease is where responsibility for that cost is divided between landlord and tenant. Several distinct lease mechanisms shape who procures energy, who pays for it, and how the bill is allocated: co-tenancy clauses, common-area pass-throughs, and the choice between submetering and direct metering. This guide explains each in plain language for both landlords and tenants in Illinois. It is educational, not legal advice; specific leases should be reviewed by counsel.
How metering determines everything else
Before the lease language, understand the physical setup, because it drives what is even possible. In a directly metered arrangement, each tenant space has its own utility meter and its own account with the delivery utility. The tenant receives the utility bill, controls its own account, and — in territories where retail choice exists — can select its own supplier for the supply portion. The delivery utility still delivers the energy and handles outages regardless of supplier.
In a master-metered building, the whole property sits behind one utility meter and one account, usually the landlord's. The landlord procures energy for the building and then allocates the cost to tenants through the lease, often using submeters — building-owned meters that measure each space's consumption so the landlord can bill each tenant for its actual usage. Under a master meter, an individual tenant generally cannot shop for its own supplier, because there is no tenant-level utility account to switch; procurement decisions belong to the landlord for the whole building.
This distinction matters for both sides. A tenant that wants control over its energy supply should confirm it is directly metered, or negotiate for it. A landlord that master-meters retains procurement control and the associated responsibility, including the obligation to allocate costs fairly. Whichever structure applies, matching the lease to the actual metering is the foundation; the rest of the terms build on it. Landlords and tenants weighing these responsibilities may also find our guide on landlord and tenant energy responsibilities useful.
Common-area energy and CAM pass-throughs
Every multi-tenant building has shared systems — corridor and parking lighting, lobby and common-area HVAC, elevators, exterior lighting — that consume energy no single tenant uses alone. These common-area energy costs are typically recovered through common-area maintenance (CAM) charges, and each tenant pays a share, usually its pro-rata portion of the building's rentable area.
The lease should make three things clear about common-area energy. First, what is included — which systems and which meters feed the CAM energy pool. Second, how it is measured — actual metered common-area consumption versus an estimate or allocation. Third, how the share is computed — the pro-rata formula, any caps on annual increases, and audit rights that let a tenant verify the charges. Vague CAM energy language is a common source of dispute, because it lets costs be allocated in ways a tenant cannot check. Both sides benefit from precision here, and it belongs on the list in any thorough contract review.
Co-tenancy clauses and their energy dimension
A co-tenancy clause links a tenant's obligations to the continued presence of other tenants — often an anchor tenant or a minimum occupancy threshold. These clauses are most common in retail centers. When a co-tenancy condition fails — the anchor leaves, or occupancy falls below the agreed level — the clause may reduce the affected tenant's rent, reduce its share of certain charges, or grant other relief.
The energy dimension is indirect but real. Because common-area energy is bundled into CAM, and co-tenancy relief can reduce a tenant's CAM obligation, a co-tenancy event can shift how much shared energy cost a tenant carries. Meanwhile, the building's common-area systems may still run — a half-empty center still lights its parking lot — so the landlord may face the same or higher energy cost spread across fewer paying tenants. Both parties should think through, at lease signing, how co-tenancy relief interacts with CAM energy allocation, so that the arrangement is understood before occupancy changes rather than litigated after.
Who procures, and where choice exists in Illinois
Procurement responsibility follows metering and the lease. Where a tenant is directly metered and located in a territory with retail choice, the tenant can select a supplier for its own account, comparing offers on the supply portion of the bill. Where the landlord master-meters, the landlord procures for the building. For gas, service territory also matters — Peoples Gas serves Chicago, Nicor serves much of northern Illinois outside the city, and North Shore serves the far-north suburbs — and the delivery utility handles delivery and safety regardless of any supply arrangement.
A well-drafted lease states plainly who procures energy, who bears the cost, and how it is billed. When the landlord procures for the whole building, tenants should understand they are relying on the landlord's procurement decisions; when tenants procure their own supply, the landlord should ensure the lease still governs shared systems and building standards. Landlords managing several properties may approach this as a portfolio question, similar to multi-location procurement.
Practical guidance for landlords
Define the metering structure explicitly and make sure the lease matches the physical reality of the building. Specify exactly what common-area energy is included in CAM, how it is measured, and how each tenant's share is calculated, and consider offering audit rights that build trust and reduce disputes. Anticipate how co-tenancy relief interacts with CAM so that occupancy swings do not create ambiguity. If you procure energy for the building, keep documentation of how you buy and allocate it, since transparent allocation is both good practice and a defense against tenant challenges.
Practical guidance for tenants
Confirm whether you are directly metered or submetered, because that determines whether you can control your own supply. Read the CAM energy provisions closely: what is included, how your share is set, and whether you can audit. If you have a co-tenancy clause, understand how it affects your CAM obligations, not just your base rent. And where you do control your own account, treat energy procurement as its own decision — the same discipline of comparing offers apples-to-apples that applies to any commercial electricity or natural gas buyer applies to you.
Energy clauses in commercial leases reward attention on both sides. The structures are not complicated once separated — metering sets what is possible, CAM allocates the shared cost, and co-tenancy can shift the allocation when occupancy changes — but the financial stakes are real, and the language should be clear before signing.
Sources
This guide is educational and not legal advice; no savings or outcome is promised. Landlords and tenants should have qualified counsel review specific lease and metering provisions.
Frequently Asked Questions
QWhat is a co-tenancy clause and does it relate to energy costs?
A co-tenancy clause ties a tenant's obligations to the presence of other tenants or an anchor. When occupancy drops, a tenant's rent or its share of common-area costs may be reduced. Because common-area energy is part of those costs, co-tenancy provisions can change how much energy expense a tenant carries during periods of low occupancy.
QHow are common-area energy costs passed through in a lease?
Common-area energy — lighting, HVAC, and other shared systems — is typically recovered through common-area maintenance charges, often allocated by each tenant's pro-rata share of the building. The lease should define what is included, how it is measured, and how the share is calculated.
QWhat is the difference between submetering and direct metering?
With direct metering, each tenant has its own utility meter and account and is billed by the utility. With submetering, the building has a master meter and the landlord measures and allocates each tenant's usage. Direct metering gives tenants supplier choice on their own account; submetering keeps procurement with the landlord.
QWho chooses the energy supplier in a leased commercial space?
It depends on metering and the lease. A directly metered tenant generally controls its own account and can choose a supplier where choice exists. Under a master meter, the landlord procures energy for the building and recovers it through the lease, so the tenant usually cannot shop independently.
QShould landlords or tenants have counsel review energy lease terms?
Yes for any significant lease. Metering, pass-through, and co-tenancy provisions have real financial consequences and interact with Illinois utility rules. This article is general information, not legal advice, and both sides benefit from having qualified counsel review the specific language.