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Robert Fischer, Esq.
Rent is the amount paid to a landlord in exchange for the occupancy of a premises, which landlord then uses to cover the landlord’s costs associated with ownership and pocketing any amount remaining a return on landlord’s investment. Rent can take many forms. The phase “gross rent” means that the tenant pays a fixed amount to landlord. There are no adjustments performed at the end of the year since the amount paid by tenant as rent is independent of landlord’s costs. The landlord pays for maintenance, insurance, taxes, and other costs from the gross rent collected. The phrase “triple net” or “NNN rent” means that landlord will pass the costs of operating costs, insurance and taxes through to the tenant. The operating costs for the common area is often referred to as CAM, which stands for common area maintenance. What is included and excluded from the definition operating costs varieties from lease to lease. The phrase “proportion share” or “pro rata share” refer to the allocation of expenses based on the ratio of the size of the leased premises to the size of the larger building or project. The landlord will often provide tenant an estimate of its proportionate share of the monthly expenses, taxes and insurance that the landlord anticipates in the coming year. At the end of the year the landlord will compare the estimated expenses with the actual expenses and an adjustment made to reconcile any difference between the estimate with the actual costs. Then there are other variations of rent payment. The phrases “modified gross” refers to a situation where the tenant pays as a portion of rent the increase in expenses over a base year. Modified gross is more common in office leases. The phrases “percentage rent” means that tenant pays tenant as rent a percentage of gross sales. Percentage rent is usually applied in retail and restaurant leases.
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Typical Methods of Charging Rent.