EVERYTHING YOU WANTED TO KNOW
REGARDING COMMERCIAL REAL ESTATE
LEASE ESCALATIONS
Presented by:
Gary M. Albrecht, Esq.
Jan Alan Lewis, Esq.
September 24, 2013
9/24/2013
Basic Concepts
A.
Definition of “Additional Rent”
1)
2)
Includes all sums and charges other than
base/fixed rent
Escalations are a subset
B.
“Without offset/set-off, deduction,
abatement or reduction”
C.
Remedies re: non-payment
Basic Concepts (Cont’d)
D.
1)
Interest
Maximum rate permitted by law
E.
Late Fees
F.
Other Fees (e.g., “bounced” checks)
Operating Expenses/Common Area
Maintenance (CAM)
A.
“Gross” vs. “Net”
B.
Base Year
C.
Definition (Landlord’s perspective)
Operating Expenses/Common Area
Maintenance (CAM) Cont’d
D.
Exclusions (Tenant’s perspective)
Capital repairs, replacements or improvements
Building expenses/roof
Compliance with laws
Management fees
Going “green”/LEED certification
Administrative charge
Insurance premiums
1)
2)
3)
4)
5)
6)
7)
a)
b)
c)
Terrorism
Earthquake
Flood
Operating Expenses/Common Area
Maintenance (CAM) Cont’d
“Pools”
E.
1)
2)
3)
Garbage
After-hours lighting
Pylon
F.
“Fast Food” Tenants
G.
Estimated/Reconciliation
H.
Dispute/Audit
1)
2)
Contingency fee
Time period
Operating Expenses/Common Area
Maintenance (CAM) Cont’d
I.
“Gross-Up”
J.
“Cap”
K.
All vs. “Controllable”
1)
L.
“Bumps”/fixed increases in lieu of
Fixed CAM (with or without “controllables”)
Real Estate Taxes
A.
“Gross” vs. “Net”
B.
Base Year
1)
C.
Decrease/“Backbilling”
Definition (Landlord’s perspective)
Real Estate Taxes Cont’d
D.
Exclusions (Tenant’s perspective)
Rent taxes
Upon sale or transfer
1)
2)
a)
3)
4)
Proposition 13
Assessments
Representations and warranties
E.
Estimated/Reconciliation
F.
Dispute
G.
Right to appeal/indemnity
Percentage Rent
A.
1)
2)
Definition (Landlord’s perspective)
Natural “breakpoint”
Gross Sales
Exclusions (Tenant’s perspective)
B.
1)
Non-retail sales
Cost of Living (CPI)
A.
Base Year or Base Month
B.
Price Index
C.
Equalization Factor
D.
Frequency
E.
Cumulative vs. Non-Cumulative/Simple
F.
“Cap”
Miscellaneous
A.
1)
2)
3)
Electricity
Submeter/Landlord’s profit
Rent-inclusion/dispute
Direct meter
B.
Promotional Charge/Merchant’s
Association
C.
Media Fund/Advertising Charge
Miscellaneous Cont’d
D.
Trash Removal Charge
E.
Barricade Charge
F.
Security Charge
G.
Water
H.
Sprinklers
I.
Insurance
Miscellaneous Cont’d
J.
Fuel/Energy/Steam
K.
Porters Wage
L.
Change in Laws
M.
Sales or Use Taxes
Conclusion/Questions?
Contact Information
Gary M. Albrecht, Esq.
Co-Chair and Member, Real Estate Department
(201) 525-6226
galbrecht@coleschotz.com
Jan Alan Lewis, Esq.
Member, Real Estate Department
(201) 525-6228
E-Mail: jlewis@coleschotz.com