Page 10 - NBIZ Magazine February 2023

and, where necessary, the cost of replacing any of
said common facilities and the costs of policing and The Exceptions to Pass Throughs
protecting it as well. In addition to the foregoing, Here below is just a sample of what can be seen in a
the common area maintenance costs shall include, tenant-friendly lease change regarding exclusions from
but are not limited to, maintenance and repair costs, common area maintenance charges.
management fees, wages, and fringe benefits payable
to employees of landlord whose duties are connected The following items shall be excluded from the
with the operation and maintenance of the building and calculation of the costs of operation and maintenance
common areas including all services, supplies, repairs, of the Common Area Expenses: (i) the cost of (or
replacements, or other expenses for maintaining and any amortization thereof) any alteration, addition,
operating the building. Tenant’s pro rata share of the change, replacement, improvement, repair, or another
common area maintenance costs means that amount item which are properly capitalized under Generally
obtained by multiplying said costs by a fraction, the Accepted Accounting Principles other than cost saving
numerator of which is the square foot area of the leased capital improvements (which will be amortized over
premises and the denominator of which is the gross the useful life of such improvements, but only to the
leasable area of the building. Tenant promises to pay extent of the savings achieved. Upon Tenant’s request,
tenant’s pro rata share of common area maintenance Landlord will provide Tenant a cost justification of any
costs monthly, in advance, on the first day of each such capital improvements); (ii) leasing commissions,
calendar month in an amount estimated by landlord attorneys’ fees, costs and expenses, all of which
as provided above. Landlord’s failure to provide the are incurred in the connection with negotiations
statements shall not relieve tenant of any liability or disputes with other tenants or occupants or
hereunder. prospective tenants; (iii) renovating or otherwise
improving or decorating, painting or redecorating
leased space for other tenants or occupants or vacant
Does the above provision pass muster? What if the space, other than ordinary maintenance provided to
landlord is passing through capital repairs to the elevator all tenants, except in all common areas; (iv) Landlord’s
and/or resurfacing the parking lot? Can these types of costs of electricity and other services sold separately
capital repairs/expenses be passed through with the above to tenants for which Landlord is entitled to be
provision? Every lease form is different. Every tenant reimbursed by such tenants as an additional charge
lease is different. The lease has to be reviewed. If a tenant over and above the base rental and operating expenses
was represented by an attorney during lease negotiations, or other rental adjustments payable under the lease
the definition of what can be passed through has most with such tenants; (v) depreciation, amortization of
likely been changed from the landlord’s lease form. the Shopping Center or other improvements within

Here is the problem. Most commercial
landlords are using leases that attempt to pass

through all of the common area maintenance
charges incurred in the operation of the subject

property through long, drawn-out provisions.
While most triple net leases have language to
pass through the obvious taxes, insurance, and

maintenance charges, some old forms still have
insufficient language to pass through all of the

expenses incurred.

10 NBIZ ■ February 2023