Watch Those Lease Costs – Some Advice for Office, Commercial and Industrial Tenants



By Gary Wartik
December 31, 2014

Lease terms can be challenging to understand, especially for someone new to business or one operating a small business who is involved in negotiating a new lease. When questioned about lease terms, Brokers often say that the questioned terms “are just standard language” or “boilerplate.” While that may be the case, this does not mean that tenants should accept lease terms without understanding all of the obligations thereunder.

Most leases of course provide for a base rent. In addition, so-called Common Area Chargers (CAMs) are added as lease costs and add significantly to monthly lease costs. CAMs include costs for water, property taxes, landscape and parking lot maintenance, and even building repairs. One of the recommendations made by tenant representatives such as Mazirow Commercial, Inc. in Westlake Village, is to ensure that leases include provisions for auditing CAM charges. This should ensure that a tenant limits its liability for CAMs to those actually due at month’s end or at year’s end. Audit provisions are not normally included in standard leases, so tenants need to ask that audit provisions be included. In most cases, landlords will agree to audit of CAM charges since it also serves to protect their interests as well.

Audit provisions should include language that deals with any over-charges in the form of either reimbursement of the overcharges or credits against future lease payments. In the event that CAM charges have been under-charged, of course audits would disclose that too and would leave the tenant liable to the landlord for the difference in costs. It is noted, however that CAM overcharges are more common than undercharges. Audits cost money, so who conducts the audits and who pays for the audit needs to be included in the lease terms.

For additional information or assistance in lease negotiations, please call Vision Economics at 805-987-7322, or Sheryl Mazirow at Mazirow Commercial, Inc. at 805-449-1945.

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