Impact on rental charges

In the management of a non-residential lease, the rentable area of ​​a leased premises as well as the total rentable area of ​​the building in which the leased premises are located, are decisive measures that have a major impact on the amount of rent payable by a tenant. These measures will not only have an impact on the base rent but also on the additional rent payable by the occupant.

Base rent

It is easy to understand that the base rent, which usually represents a fixed rent per square foot multiplied by the area of ​​the leased premises, is directly impacted by the measurement of ​​the leased premises. For example, if a lease provides a rental rate of $ 10 per square foot per year and the area of ​​the leased space is 10,000 square feet, the annual base rent will be $ 100,000.

Additional rent and proportionate share

As for the additional rent charged to the tenant, it normally consists of that tenant’s proportionate share of the operating expenses and property taxes of the building in which the leased premises are located. The proportionate share represents a % or a fraction, the numerator of which is the leasable area of ​​the leased premises and the denominator of which is the total leasable area of ​​the building. For example, if the leasable area of ​​the leased premises is 10,000 square feet and the total leasable area of ​​the building is 200,000 square feet, the tenant’s proportionate share will be equal to 5%, or 10,000 / 200,000. Therefore, the higher the share, the more the tenant will have to assume a large part of the operating expenses and property taxes of the building.

Lessors’ manipulations

In order to generate greater income for his business, an owner / manager will benefit from overestimating the rentable area of ​​the leased premises and underestimating the total leasable area of ​​the building. Unfortunately, some lessors manipulate the measurement data and thus blur their tenants. The latter are kept in the dark.

Next blogs

In a series of blogs that will be released starting Thursday, March 22, we will begin to list the schemes used by landlords to outsmart tenants regarding space measurements.

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