Expert: Jim Avancena, CPM - 8/5/2010

Question
Hello, I have already signed a lease for retail space stated to be 1200 sq. ft.  In the process of arranging for new carpeting, I've discovered that the space is actually 960 sq. ft.  Do I have any legal recourse to pay less in rent and CAM each month, based on the actual sq. footage vs. the amount stated in the lease?  Thank you.

Answer
Cheryl -

I hope the following extended response will explain your "recourse".  

Often in a lease there are terms (like "gross sq. ft.", "rentable sq. ft." and many others) in the provision that stipulates the number of square feet leased that a lay person does not particularly notice yet they have the impact of allowing the landlord to legally make the tenant pay for monthly rent and "additional rent" (CAM, Property Tax, etc.)based on the "inflated" total of square footage (1,200 s.f.) even though the actual "net" square feet of floor area that the tenant can put carpet down on(960 s.f.) is much less.

Notice I said "often", and not "always" at the start of my first paragraph above.  

There are also instances where the total square footage is just overstated, and there is nothing in the lease that allows the landlord to charge you for more square footage than you have actual floor area.  This could be a mistake, or, more likely, an opportunistic landlord that is hoping you won't notice the overstated square footage total.  This should be a fairly straight forward problem to correct.

I don't want to make this too complicated, but it is not uncommon for your store area to contain; for example, 960 "net" square feet of useable floor area, also have lease wording that allows the landlord to legally add another 140 or so additional square feet (that would now be up to a total of 1,100 sq. ft.), AND, the landlord has "overstated" - in an innocent(?) measuring error - the combined amount of retail space you have by another one hundred (100) square feet.  This situation will take some time to sort out because the landlord will likely tell you that the final 100 square feet of bogus space that you say has been wrongly included is just your measuring incorrectly.

You should not believe that text in a lease is  plain language that you can simply apply common sense to and end up with a fair deal.  Usually that attitude is WRONG.  Commercial Property owners are usually not Sunday school teachers!  The are very skilled at this game.  If you had retained a real estate broker to assist you with your retail store lease acquisition, he/she would have explained this potential problem to you in your first conversation about leasing retail space.  

I do not know how long ago you signed your lease, but you have already committed to pay the stipulated rent for a specific period, and you likely have expended significant personal funds to prepare you shop/store for opening.  The landlord probably has some sort of security deposit you provided, and you may or may not have had the bad luck of executing a personal guarantee agreement along with the security deposit.

You may simply confront your landlord or landlord's leasing agent/property manager and explain that you believe it has made an error in the volume of square feet that is listed in your lease (remember, this is a document that you have already approved by signing the lease).   Let's hope that the landlord apologizes to you and agrees to change the total to a more reasonable total.  If so, you will have resolved this problem.  

However, you may decide to leave the meeting with the landlord or it's agent because you don't care to stand there while the landlord or agent continues to laugh in your face.

You will likely find that the landlord or its' agent will try to explain to you why the total square footage figure in you lease (1,200) is actually correct in spite of you having a total "net" square footage measurement of 960 square feet.   The polite explanation will be helpful, because, you will hear the landlord's justification for the apparent overstatement of your lease square footage.   There is an excellent chance that at the end of your discussion the landlord or its agent it will have told you they will not change the square footage total stipulated in your lease.

At this point you need to either retain the services of a VERY experienced retail real estate broker, or an attorney that specializes in commercial real estate lease law, often referred to as "Landlord/Tenant  law", or "L & T"  law.  Do not hire a real estate attorney that primarily practices other kinds of cases - a residential specialist that does closings will be a waste of your time and money.

The experienced real estate broker should be able to review your lease, see your space and the retail center, hear from you the landlord's reasons for the overstated square footage, read the correspondence in your files and develop an understanding of the give and take in your lease negotiations.   The broker should then be capable of advising you if there has actually been an error, if you have been victimized, and if he/she believes you have any recourse.    There is a possibility that the broker could actually resolve the dispute, but that is unlikely.   Depending on the brokers analysis, you may or may not then wish to seek counsel.

If you decide to seek counsel, keep in mind that you don't need to hire a "big name" lawyer, but you do need an attorney that specializes in Landlord/Tenant ("L & T") law.   If you first reviewed your situation with a real estate broker, tell the attorney what the broker told you.  If you came directly to the attorney's office, he will need to go through the same things discussed in the previous paragraph that the broker would have reviewed.  The attorney will also discuss other matters and evaluate your overall situation, telling you if he/she thinks your problem can resolved without filing a claim in court - sometimes this can actually occur. He/she will also say if you would win or lose in court, and generally advise what they believe your course of action should be.   

Please send me a follow up question if you need me to clarify any of the material above.  Good luck getting this problem resolved.

- Jim