§ 19.01 Office Lease Rent

• Jurisdiction: United States
• Publication year: 2022

§ 19.01 Office Lease Rent

Rent in the context of an office lease can be anything of value that is bargained for in consideration for the tenant's exclusive right to use and occupy a particular space. It includes services, utilities, construction, operating costs, taxes, fees, owner's profits, and any other expense towards which an occupant's rent goes.²

Allocating financial responsibility for operating, repairing and maintaining the premises should be carefully considered and addressed in the lease. Generally the landlord covers costs related to the building ownership. The costs of operating the building, however, are generally passed on to the tenants. There are different types of operating expenses: those that relate to the tenant's space specifically and those that relate to the building as a whole including common areas, elevators, stairwells, bathrooms and the lobby, etc. Tenants generally pay their pro rata share of such expenses.

Note that the operating costs in an old, inefficient building can be substantially higher than in a more modern, energy-efficient building. Maintenance and repair costs, the need to replace old equipment, and the fact that warrantees are likely to have expired, can all add on to the expenses the tenant will be expected to shoulder in an old building. Therefore, the parties will want to consider those costs and how they should be allocated. Often tenants seem to focus on the rent rates (dollars per square foot) for the space they want to lease. However, those rates are generally a reflection of market conditions and competition. It is really the other terms and conditions of the lease—the various line items—that will directly impact a tenant's business operations and may be far more important than the rent rate. The "rent" that a tenant agrees to pay in a lease is usually only one of several expenditures that it may be obligated to pay during the lease term. In modern office leases, rent actually consists of the following components:

Base Rent—Base rent³ is the rent that is specified in the lease as a hard number. It is generally stated in terms of a total amount for the term or as an annual, monthly or per rentable square foot amount. Base rent may stay fixed during the term or may be "stepped up" periodically, for instance, increasing every two or three years. Typically, the base rent quoted to a tenant will include a share of (1) the landlord's mortgage or debt service, (2) the taxes paid by the landlord on the building

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