Readers of our new book, Negotiating Commercial Leases & Renewals FOR DUMMIES, will learn (
When a commercial property has several vacancies, the landlord, typically, will be responsible for paying his proportionate share for the vacant units. Some landlords try to avoid paying for any of the CAM charges on the vacancies by adding language into the lease agreement that spreads out the obligations for the vacant spaces amongst the current tenants. In some situations, chiropractic tenants can be carrying a very heavy financial burden if the property is not fully leased.
Chiropractic tenants should consider the following points:
Classify Common Area: Common area is the area of a building used by all tenants and their customers. Examples of
Negotiate the Operating Costs as Rent: You may well hear from most commercial real estate professionals that Operating Costs are not negotiable; there are, however, aspects of these costs that can indeed be changed to the commercial tenant’s favor. The landlord wants to make sure that the tenants pay for all the Operating Costs for the property. There’s nothing unusual about that. But when The Lease Coach analyzes Operating Costs for groups of tenants in a building, we frequently find that the tenants are subsidizing capital improvements that the landlord is using to enhance or increase the building’s value. Negotiating to cap increases to certain costs or excluding certain items from Operating Costs can help keep these in check.
Look at What You’re Paying For: The majority of commercial lease agreements may stipulate the specific components of the Operating Costs that the tenants need to pay for. Typical examples include general maintenance, painting, lawn cutting, snow removal, property insurance and so on. Almost every lease agreement has an Operating Cost clause and typically defines these Common Area Maintenance charges in a short – or long-form manner. From a chiropractic tenant’s perspective, longer is better because it creates certainty.
Understand why Proportionate Share Counts: If a chiropractic tenant occupies seven percent of a commercial property, they can typically be required to pay seven percent – their proportionate share – of the Operating Costs as additional rent. (JEFF – Is seven percent of a commercial property a good, average size for a chiropractic tenant to lease?) But not all tenants used Operating Costs proportionately. For example, would a hair stylist or your chiropractic practice use more water? Have your proportionate share of the CAM costs (as a percentage number) actually stated in the lease agreement. And don’t be afraid to question or dispute the Operating Costs and your proportionate share.
For a copy of our free CD, Leasing Do’s & Don’ts for Chiro Tenants, please e-mail your request to JeffGrandfield@TheLeaseCoach.com.
Dale Willerton and Jeff Grandfield - The Lease Coach