Understanding and correctly calculating your occupancy costs is obviously necessary for managing your company expenses. However, if you’re not sure what the various components are that contribute to your overall costs besides your rent, it’s easy to underestimate those costs. Review the following items with your tenant representative to understand what they are in calculating your real occupancy costs.
Common Area Maintenance (CAM)
Maintaining the common areas of your building is the responsibility of the property manager but your company will pay for covering the costs of it. Typical fees include parking lot maintenance, snow removal, landscaping and trash collections. Generally, landlords want CAM charges defined broadly so they can pass through a majority of their operating expenses to tenants. Tenants generally want CAM charges defined narrowly in hopes that the landlord pays a majority of the operating costs. Your tenant representative can help you negotiate the best possible terms.
Property Insurance and Taxes
You will be responsible for paying a portion of the landlord’s property insurance and property tax bills. Generally, the amount you owe for both is based on the square footage your business occupies compared to the overall square footage of the building (“proportionate share”).
General Liability Insurance
General liability insurance is something you must-have to protect your business. In most cases, it’s required as a term of the lease agreement with defined minimum coverage.
Building Security
You’ll be responsible for paying for your own security system if you have one or you may owe a portion for the building security system and monitoring depending on your lease structure.
Utilities
Utilities like water, electricity and sewage may not be included in your monthly lease and must be added to other expenditures to calculate your total occupancy costs. Internet, cable and phone service are not included in the rent.
Cleaning Services
In some lease structures, Tenants are responsible for hiring and paying for their own cleaning services.
Hire an Experienced Tenant Representative
In order to protect your interests in lease negotiations, consider engaging howardcommercial. The tenant rep knows the ins and outs of the real estate transaction including all the provisions contained in a lease agreement. A real estate lease is complex legal document with provisions that contain significant financial implications beyond the rental terms. How operating expenses are handled, interruption of basic services, sublease provisions, the list goes on and on. Give us a call at 314.821.0085 or send us an introductory email at doug@howardcommercial.net
