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OP-ED: Residential Utility Bills: A Well-Intentioned Law Creates a Serious Trap for the Unwary 

by Patrick J. Cleary

Published: July, 2021

Submission: July, 2021

 



Utility bills can bring unwelcome surprises: a water bill that reminds you of the extra irrigation costs incurred during a heat wave, an electric bill that makes you realize how much extra power is used when working from home or gaming nonstop, an embarrassing cable bill documenting how many shows you binge-watched last month. But consumption of utilities is generally within the control of the consumer, and getting the bill is really no different than the check appearing on your table at the end of a meal out.


One exception is when the bill actually does not go to the consumer, but rather is sent to and paid by the consumer’s landlord, who then passes those costs through to the consumers as tenants. The potential for overcharging the user/tenant (whether nefarious or accidental) is real, even if seldom occurring. Oregon’s Legislature has addressed this potential in the Residential Landlord-Tenant Act (specifically, ORS 90.315) by requiring residential landlords to be transparent in their pass-through of utility charges to their tenants. However, the law, as written, unfairly and harshly punishes landlords for noncompliance with the technical requirements of the rule, even if the failure was inadvertent — and the noncompliance is punishable even if the charges passed through were completely accurate.


The Residential Landlord-Tenant Act seeks to promote transparency through technicality by requiring landlords to include underlying provider utility charge information for utility costs passed through to tenants. ORS 90.315(4) applies to utility charges and requires, among other things, that landlords:


  1. Include in the bill to the tenant a copy of the provider’s bill; or
  2. State that the tenant may inspect the provider’s bill at a reasonable time and place and that the tenant may obtain a copy of the provider’s bill by making a request to the landlord during the inspection (with payment to the landlord for the reasonable cost of making copies).

The requirement to include the provider’s bill, or statement of its availability, seems innocuous at first glance; however, it applies to every pass-through utility charge for each tenant. Compliance requires that a landlord either attach the underlying provider’s bill, with updates, for each utility every time the tenant is charged, or create and indefinitely resend a form statement describing the availability of underlying provider bills. This creates an administrative burden and associated cost that the landlord will inevitably offset through increased rent.


The reality is that a technical requirement to include additional documentation with every utility charge passed through to tenants does not increase transparency, as it is unlikely that people crosscheck calculations from a multi-page provider’s bill or read a form statement and request copies every month. It is likely that most would forego the included provider’s bill or statement in lieu of lower rent costs and simply reach out to the landlord when a utility charge is unusually high.


A landlord’s failure to comply with the technical requirements of ORS 90.315 can be punished harshly. ORS 90.315(f) provides that “the tenant may recover from the landlord an amount equal to one month’s periodic rent or twice ‎the amount wrongfully charged to the tenant, whichever is greater.‎” In instances where the violation is technical (i.e., no overcharge occurs), the damages recoverable are one month’s periodic rent.


Oregon courts have not yet resolved whether the damages can be “stacked.” Stacking damages would allow a tenant to recover one month’s rent for every month the technical requirements are violated, rather than being limited to one month’s rent in total even if the violation was repeated.


The stacking theory of damages leads to an absurd result for a failure to comply with technical requirements. Assume for example that a landlord is unaware of the requirement to include a copy of the provider’s utility bill, or a statement of its availability, in the bill sent to the tenant. The tenant, who pays $1,500 per month in rent, finds out one year later that there was supposed to be an extra document or statement attached to their utility bill and sues the landlord. The landlord never overcharged the tenant for the utility but did violate the statute by failing to include the provider’s bill or a statement of its availability. Under the stacking theory of damages, the landlord’s potential liability is the amount of monthly rent multiplied by each month landlord was in violation, or $18,000.


The above hypothetical is limited to one tenant and one utility bill. A more realistic situation involves multiple tenants with multiple utility bills, and the amount doubles for each tenant or utility bill added. Running the same hypothetical for a landlord with 30 tenants who each pay two utility bills per month for a year, the potential liability increases to $1,080,000. Over $1 million in liability for a technical violation, all despite the fact the actual amount overcharged is zero. The extreme penalty creates a trap for unwary landlords and, once again, leads to increased rent in order for landlords to account for the risk.


The administrative burden and associated cost, along with the potential for extreme penalties, create a need for the technical requirements of ORS 90.315(4) to be amended. One approach could require landlords to provide underlying provider utility bills only when a tenant makes the request. Another approach could provide for a penalty-free warning for first-time offenders. Either amendment would ease the administrative burden of including additional paperwork with every utility bill passed through to tenants and substantially reduce the risk of landlords incurring an extreme penalty despite not overcharging for utilities. The need for additional expense and risk to be absorbed by landlords and passed down to tenants through an increase in cost of rent is similarly reduced. The amendment would preserve transparency by still allowing tenants to review underlying provider bills as often as they would like by simply making a request to the landlord or their representative. As currently written, ORS 90.315(4) is an overly punitive technical requirement — the same policy goal can be achieved without the unnecessarily harsh outcome for unwitting property owners.


This article summarizes aspects of the law; it does not constitute legal advice. For legal advice for your situation, you should contact an attorney.


Column first appeared in the Oregon Daily Journal of Commerce on July 15, 2021.


 



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