Set Operating Expense Cap Based on “Cost Disclosure Statement” from Owner

If you sign a lease that requires you to pay a share of real estate taxes, operating expenses, or other costs, you could be in for a big shock if the numbers turn out to be much higher than the owner led you to expect. Higher than anticipated costs can hurt tenants’ businesses, especially smaller tenants or those just starting out. But you can avoid underestimating these “pass-through costs” if you set a cap on them. But how do you make a cap effective? You need to know the costs up front from the owner so that you can base your cap on them.

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