To determine the operating costs involved in a commercial real estate lease, it’s important to know exactly what services would be provided by your landlord. Generally, services that are provided for a leased office space are electricity, cleaning services, security, air conditioning, heating, maintenance and repairs.
Whether or not you would be paying for these operating costs separately from your monthly rental depends on the agreement between you and your landlord.
It is very important to understand exactly the terms of payment associated with your lease right before signing any contract.
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Your landlord can either charge you separately for the operating costs or include operating costs in your monthly lease payment.
In some cases, your landlord can ask for an increase in your rental when operating costs increase. This is called a net lease where the landlord bases the increase in rent on actual expenses incurred. In other cases, the landlord may choose to increase your rent on an annual basis. This is done for Gross Leases and Step Leases.
Landlords can also unexpectedly charge you additional payments for services that are provided during holidays or weekend or after business hours. If you do agree with this arrangement, it is important that you are clear about what the exact conditions of payment will be. Nevertheless, you should be aware of this condition right from the day you sign your lease contract.
Aside from operating costs, a landlord may also require a tenant to pay for property taxes. If this is the case, you have to be very clear with your landlord exactly how much of the property taxes you would be paying.
If the property has been on hold for a long time, you can be stuck with an unreasonably high property tax in your bill. See to it that your landlord knows that you are aware of your rights as a tenant especially with regards to Paying Business Property Taxes.
Capital Improvement Costs
Another important factor to consider with regards to operating costs is paying for capital improvements of the office space. Landlord should not impose such major charges to their tenants so make sure that any major expense is not included as one of your operating cost charges.
Remember, not being clear about the operating costs and other charges involved in your office space lease can spell out problems in the future. It can be a major hindrance to your business’s cash flow if you’re stuck with costs that you were not aware of when you signed your lease. Such charges may be included vaguely within your lease contract but you might have failed to notice during the signing.
Once you’ve signed however, you are bound by terms and conditions of the contract and there’s no way to get out unless your landlord releases you. With this in mind, see to it that all terms of payment are clearly stipulated in your leasing contract or have an attorney review the lease contract before putting in your signature on the lease agreement.
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About the Author:
Melanie James has spent the last 14 years working with businesses to implement quick, effective and inexpensive changes to their businesses to increase productivity and their bottom line.