In some lease agreements, the Tenant agrees to pay base rent plus additional rent. Additional rent may include taxes, insurance, common area maintenance and utilities. Each building is different, and the brokers typically negotiate these business terms and memorialize them in the Letter of Intent.
It is important to note that some additional rent items such as taxes can increase (or decrease) over time. In the lease agreement, the Tenant may have the right to request supporting documentation to verify that the additional rent is correct. Some Landlords will also spread the estimated amount of the additional rent into monthly payments and the “true up” the payments at the end of the year. This method is often preferable to Tenants for budgeting and cash flow purposes.
*Thank you for taking the time to read this article. This article is part of our “Commercial Leasing for Non-Lawyers,” a Blog Series on Commercial Leasing. Other aspects of commercial leasing transactions in New York are discussed in other Parts of this series.
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