Hey, Don’t Give It Away
October 02, 2015
- When negotiating a lease, many tenants fail to negotiate an important term: their liability for the buildings operating expenses
- While negotiation over operating expenses may seem less important than the cost per square foot, operating expenses can actually be more than the base rent.
To complicate matters, charges for operating expenses are unpredictable and may be difficult to control. Most tenants don’t recognize the importance of these negotiations. Landlords, on the other hand, benefit when tenants agree to vague terms instead of nailing down the specifics of who pays for what.
Here are two hidden money traps to address in lease negotiations to get control of operating expenses:
1) Insist that your landlord take advantage of any available discounts for services and materials purchased for use in the building, complex, or campus you occupy. Many landlords lack an incentive for taking advantage of discounts because they simply pass expense through to tenants. Savvy tenants take this one step further by requiring the landlord to pass the benefit of their discounts through to tenants.
2) Many landlords accrue late payments fees and penalties by failing to pay their bills on time, then simply pass those expenses on to their tenants. If the landlord is unable to pay bills in a timely fashion because of a late-paying tenant, this is justifiable. However, if late payments are a function of poor management, tenants have no obligation to accept the financial burden. During the lease negotiation, specify that you will only be liable for late payment fees and penalties if you fail to meet your obligation to pay your rent on time.
During the lease negotiation process, it is vitally important to spell out specifically what each party to the lease will be responsible for. In addition, ask for limits based on what is reasonable and acceptable for the landlord to pass through.
Utilizing professional tenant representation like that provided by Bayshore Partners helps ensure that you avoid hidden traps in your lease.
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