The basic or minimum rent in a commercial lease is the minimum initial rent due each month to the Landlord, often based on a dollar value per square foot of the leased space, and sometimes increasing each year throughout the term of the lease. Additional rent refers to fluctuating items a Tenant may be charged that are not included in the base rent. Additional rent would include such items as the Tenant’s proportionate share of common area maintenance and operating costs; utilities consumed in the premises; realty taxes applicable to the premises; insurance premiums; promotion and advertising; heating ventilating and air conditioning; legal and audit costs, and administrative fees.
A skilled commercial lease lawyer may be able to negotiate certain exclusions from the Landlord’s additional rent charges, such as restricting the definition of “proportionate share” to ensure that all leaseable space in the building is included in the area calculation and not just the space that is actually leased to tenants, so that the Tenant is not subsidizing the Landlord’s unleased space. The Tenant should have to pay only costs and expenses that are incurred by or on behalf of the Landlord acting reasonably and equitably. Administration fees should be negotiated and should not be applied to insurance, professional fees, repairs, and depreciation. The administration fee should also be calculated after the deductions and exclusions from operating costs are calculated. Certain deductions from operating costs should also be made, such as taxes personal to the Landlord, repairs that are the Landlord’s responsibility and are of a structural nature or that are attributable solely to other tenants, or are a result of faulty construction or inferior or deficient materials or workmanship or inherent structural defects or weaknesses, and other expenses due to the Landlord’s negligence or wilful acts or omissions.