Many first-time commercial renters are not aware that there are at least two types of rent included in a commercial lease. First, there is “base rent.” Base rent is the more familiar term for commercial lessees, both conceptually and in practical terms. Base rent is similar to the rental amount in a residential lease agreement. Base rent is the amount the landlord charges to the tenant for occupancy. It is a fixed annual or monthly amount that is influenced by such additional considerations and costs as sales tax and annual increases in rent. A commercial lease attorney works with landlords and tenants to resolve their issues.
Most commercial leases contain an elevator clause whereby the lessee’s rent increases year over year. Base rent is relatively simple to calculate and is likely stated clearly in a commercial lease. A commercial lease attorney can help point out this important lease provision to you to clarify what your obligation(s) may be.
The more difficult obligation a landlord may impose on a tenant in a commercial lease agreement is what is generally known as “additional rent(s)”.
Additional rent in a commercial lease is also known as tenant’s “proportionate share.” A tenant’s proportionate share may include a proportional percentage of the real estate taxes, water and sewer, insurance for the building, maintenance and repairs, and in some cases, HVAC repair or replacement (this is not an exhaustive list). A careful reading of a commercial real estate lease often reveals additional costs. An exact number may not always be calculable because tax assessments change on an annual basis. Insurance premiums also fluctuate and may cause uncertainty in the amount the landlord is charging the tenant. Depending on the type of business a lessee/tenant maintains, the utility costs may be significantly higher or lower than other building occupants, and thus may compel the landlord to assess the lessee for any overages. A landlord tenant lawyer can help you understand common area rent, and all additional rent additions to commercial leases.
HVAC stands for Heating, Ventilation, and Air Conditioning. Many businesses require the use of increased A/C and heating energy and ventilation input/output. It is in the landlord and tenant’s best interest to explain to one another (in good faith) what the current status of the HVAC units within the property may be, and what the requirements of the tenant are as pertains to the use of the equipment in relation to the nature and classification of their business. It is not unusual for a renter to be asked to contribute to the repair and or replacement of HVAC units, but both parties need to protect themselves against usage that is beyond ordinary daily expenditure. Otherwise, it is not uncommon for litigation to arise over damage to HVAC units, and the fight is on to prove whether the units were in good working order before, and whether the tenant overused or misused the HVAC units in such a manner as to cause damage(s). Litigation can be avoided in many cases with open communication between the parties.
If you are a landlord
or a tenant and need legal advice call a landlord tenant attorney.