Avoid Unpleasant Surprise from Late Billing

January 12, 2017
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The costs that tenants are typically responsible for, in addition to rent, can include overtime heating, ventilating, and air conditioning (HVAC); parking charges; common area maintenance; taxes; or insurance. You might think that if you’ve specified the way they are calculated in the lease, you’re protected. But if you haven’t considered the time frame of when those charges can be billed, you’re open to problems down the line. That’s because the owner could bill you for expensive charges sporadically—and demand to be reimbursed for several months of costs and fees all at once. If you’re not prepared to pay such large amounts, the owner’s periodic billing of older (and often forgotten) claims could make it difficult to run your business. To avoid unpleasant surprises, negotiate to amend the lease so that the owner is required to waive these “stale” claims.

To make the negotiation less painful for the owner, offer to make the claims waiver provision reciprocal. If the lease doesn’t include a time limit on your ability to audit the owner’s operating expenses, your claims for incorrect charges are subject only to the statute of limitations—and could be enforceable for years. If a tenant makes the waiver reciprocal by agreeing to waive its claims based on operating expense overcharges that occurred during a set time period in the past, the tenant and owner have a clean slate as of the date that period ends.

For an example of a reciprocal waiver of audit that you can use and the ways you can use reconciliation as part of this strategy, see “Protect Yourself from Being Blindsided by Owner's Billing Delays,” available to subscribers here