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A commercial tenant may want to review operating expenses

On Behalf of | Oct 31, 2018 | Landlord / Tenant |

Accepting the first draft of a lease would probably be a mistake in most cases. Instead, a California commercial tenant may want to review the terms to make sure they are fair. One of the places where a budget for retail space could be busted is in the operating expenses, so they need particular attention.

While it is normal for a property owner to pass operating expenses to the tenant, it does not mean that the tenant should just accept whatever is in the lease. One of the first things to do is ask the property owner for documentation of the taxes, operating expenses, utility charges and more for at least a few years. This allows the tenant to determine whether he or she would pay a reasonable price for operating expenses.

Thereafter, it would be a good idea to review the list of items the property owner calls operating expenses. Any items that the tenant does not necessarily believe would be appropriate to pay could be negotiating points. Another point to consider is how much the expenses will increase over time, along with ensuring that the tenant is paying the appropriate percentage.

What a California commercial tenant enters into negotiations for a lease, it is important to remember that operating expenses are often above and beyond the base rent. Failure to make sure that these costs are not too much could result in a tenant not being able to afford renting the space. In order to make sure that the lease benefits the tenant, it may be a good idea to review the terms carefully.