If you do not check to make sure you are only paying the rent you agreed to pay for, who will? Do you think the landlord will check to make sure you are not overcharged?
Consider the following examples of rent overcharge.
1. Check each additional rent cost.
a) Does each cost make sense? We reviewed a lease and an additional rent statement, which showed an unusually high common area cost. In particular, the cost of water was very high. It turned out that one tenant in the plaza, a florist, happily connected his coolers to the water supply for the plaza. So in fact, each tenant in the plaza was paying a share of the florists water use, and had been for several years. We negotiated a settlement on behalf of our client which cleared the overcharge and prevented such charges in the future, saving him $16,855.81.
b) Are any costs extraordinary? One additional rent statement we reviewed for a premises in a small plaza showed a cost for landscaping of $57,000 in one year. I spoke to the landlord (who happened to be a landscaper with children in university) who claimed that the plaza was beautifully landscaped with fruit trees, lawns and flower gardens. When I visited the plaza, I could see that there were seven sapling fruit trees, with a small strip of grass growing along the parking lot. We negotiated a settlement which reduced our clients cost to its share of only a reasonable fraction of the total cost claimed by the landlord, saving our client $16,470.00.
c) Did any cost increase dramatically one year to the next? We looked at an additional rent statement, which compared to previous years statements showed a significant increase in the “repair and maintenance” cost. We made one call to the landlord, who responded that “a review of the charges found that roof repair invoices were inadvertently charged to your CAM. We have removed these charges”. This saved our client $2,787.40.
2. Check rent calculations.
a. Are the rent values correct for the lease year? We have reviewed many leases which indicate that the rent being charged does not match with what the tenant agreed to pay for the particular year, in some cases by several dollars per square foot per year. By way of example, $3 per square foot by 1500 square feet is $22,500.00 over five years!
b. Are the rent values calculated using the correct premises area? We reviewed a lease and an additional rent statement for a large practice in space owned by a large R.E.I.T. In this case, the landlord “forgot” to acknowledge a cap on rentable area gross up, effectively overcharging the tenant by 3.5 per cent or $7,909 per year.
3. Check that each cost is agreed to in the lease.
a. Are costs charged for not indicated in the lease? We reviewed an additional rent statement which added an administration fee of 15 per cent to additional rent. There was no provision in the lease for this cost to be added; the landlord (a large R.E.I.T.) simply claimed it was a standard charge in all of their leases and the tenant had to pay. All the tenant had to do was to stop paying what it did not agree to pay for, which saved the tenant $10,657.00.b. Is each cost administered properly? One lease we reviewed indicated that the additional rent would in no case increase more than two per cent on a year over year basis. We reminded the landlord that this provision was in the lease, and therefore the tenant had significantly overpaid additional rent. Our client was very pleased to receive a check for over $20,000.00.
4. Check that the premises area measurement is administered properly.
a) Do the premises area measurement criterion in the lease correspond to the area certificate? We reviewed rent statements, an area certificate and the lease, following which we reminded the landlord that we had measured the premises, and the rent charged according to the measurement was not correct. We corrected the measurement to correspond with lease criterion, reducing the premises area and therefore, rent payments by almost 20 per cent.
b) Was the premises ever measured and rent adjusted accordingly? We reviewed a lease for a premises which indicated that it measured approximately 1,100 sf. My estimate of no more than 950 square feet as confirmed by an engineer who determined that the premises measured 947.5 sf. The amount of rent overcharge in the five years was just over $4,000.00 per year, or $20,000.00 for the five years in, which we retrieved for our client.
We recommend that you have your lease and rental statements read and understood annually, with particular attention to the areas of premises measurement, base and additional rent calculations, and what elements your additional rent includes and excludes. In most cases we can determine within an hour or two of our time whether there is overcharge.