Both parties should attempt to be as specific as possible when negotiating commercial lease common charges. There is clearly a disparity in the knowledge of these costs. As part of their due diligence, a prospective tenant should request that the landlord provide a detailed history of past lease common charges.
Many landlords believe that making these provisions vague is in their interest. Overbroad, cursory language is frequently accepted without comment by tenants. This allows owners to pass any unexpected costs to their retail or office tenants as common charges. Recent case law, however, has shown that that may not always be true. This matter involved a landlord who billed for shared expenses that included other properties owned by him. This is a common practice when owners have several properties close together. In these situations, landlords understandably take advantage of economies of scale, volume discounts, and the different buildings’ costs. Owners generally have one property management company for all their buildings, and that cost is shared across multiple properties. This practice of sharing expenses is known as “spreading.” It is not as unfair as it seems because the tenant’s proportionate share of the costs is adjusted accordingly.
In this case, the New York trial court ruled that the lease common charges language did not expressly reference the other buildings and, therefore, the tenant was not responsible for the costs of the landlord’s other properties. In the interest of fairness, the Judge reformed the lease to recalculate the appropriate allocation of the tenant’s responsibility for that building’s costs.
The lack of clarity in the lease common charges clause caused the owner and tenant to spend unnecessary legal and accounting fees.
For more information, call the experienced New York commercial lease and real estate attorneys at Wright Law Firm NYC. We provide top-tier commercial real estate legal services for the NYC business community. To schedule a consultation, contact our office by email or call us at (212) 619-1500.