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Understanding and reviewing the ‘hidden rent’

Author

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  • Burke, Rick

Abstract

Tenants must understand their lease before signing it. Much too often, a tenant looks back and realises they have agreed to something that is now costing them thousands of dollars per month. This paper opens the door and introduces the tenant to the many types of possible overcharges. It looks at several basic areas of overcharging and explains why they exist and how to avoid them. These areas include pro-rata share allocation, administrative charges, non-common area maintenance (CAM) expenses, real estate taxes and caps. The paper also looks at some specific overcharges related to office and industrial leases such as base year and gross-up clauses. Understanding all the ins and outs of a lease is very difficult, especially for someone not in the real estate business. As with most things, the more detailed it gets, the more complex it becomes. This is especially true for additional rents such as CAM, operating expenses, real estate taxes, insurance and other monetary lease items. These items, if not fully understood, will become ‘hidden rent’.

Suggested Citation

  • Burke, Rick, 2014. "Understanding and reviewing the ‘hidden rent’," Corporate Real Estate Journal, Henry Stewart Publications, vol. 3(2), pages 95-100, January.
    • Handle: RePEc:aza:crej00:y:2014:v:3:i:2:p:95-100
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    More about this item

    Keywords

    lease auditing; lease administration; occupancy cost; operating cost; lease abstracting; lease audit; hidden rent; common area maintenance;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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