Expert: Jim Avancena, CPM - 12/10/2007

Question
We assumed a lease a couple years ago for a commercial property that has a CAM charge of around $3/sq ft.  Our lease states our space is 2400 sq ft, where after measuring it, it's only 1700 sq ft (around a 30% error).  Do we have any legal grounds to get a refund of this % difference in our pro-rata share that we've already paid?

Thank you for your time,
Jeff

Answer
Jeff-
You are asking me two questions without knowing it.

What do you mean by "assumed"?  Are you legally documented "subtenant"?  Is there a written agreement between the initial tenant and the landlord - and signed by both parties - recognizing you or your company as a subtenant, or perhaps, "Assignee" of the initial tenant?
This is necessary before you will have "standing" to challenge the landlord about your concerns.  If not, you will need to have the initial tenant that first signed the lease challenge the landlord on this question.

Often, a lease will state a number of square feet as the total amount of space, however when you actually measure your internal space, you find that you actually measure less.  This is usually because the landlord included a portion of the common area of the shopping center or building to your actual amount of space and came up with the total you have stated in your lease.   This process is legally acceptable provided this practice of measurement is clearly indicated in writing in the lease.  If including some amount of the common area into the lease total was done, and was not clearly stipulated in writing in the lease document, you may have a strong argument for having your pro-rata share decreased.  Additionally, all of the excess base rental and CAM charges you have already paid because the pro-rata share being too high should be returned to you.

Note that there may be words in the text of the lease or on exhibits to the lease that describe this procedure that are not readily noticeable.

For example, the exhibit in the lease that shows (usually outlined by a colored highlighter or other way of marking) the actual perimeter walls of your store/shop/suite floor plan to make it clear which spaces that are not included in your lease of your space, may have a few words at the bottom of the page that may state: "Store 1132 not including the common area" and the landlord could try to say that is where the lease "explains" that the common area square footage amount was to be included in the total square footage measurement.   There are many cryptic expressions that are used by landlords to justify such practice.

An acceptable way for making it clear to all parties that this process was utilized, is for the lease that actually state in the text something like this: "...the tenant hereby leases store number #12 (or suite #1120 of the building)in the amount of two thousand, four hundred square feet of gross square feet of space; which includes seven hundred (700) square feet of the common area...".

Look thru every word(EVERY word), of your lease to determine is that language, or similar language was included in the text to make that clear to everyone.

You should also be aware that sometimes a Tenant trying to sublease or assign their lease obligation will purposely avoid making this additional square footage clear to you because they are afraid you will not believe the "hidden" 700 square feet put into the total amount makes the lease as good a deal and you won't agree to take over the lease -and the initial tenant won't get out of their rent obligation.   This may make the prime tenant; or the "original" tenant responsible for you paying for space that you were not aware of.

One thing you may want to do is check with some of the other tenants in the shopping center or building, and see if their lease documents clearly stipulate that additional space has been added to the actual amount of store or office space indicated in their lease.  If none of their leases contain such clear explanations that such a process has occurred; you may all need to take the matter up with the landlord - you may all be due some refunds!

Remember, this is a common practice.  The important part is whether or not this process of adding extra "ghost" square feet to the total net measurement has been clearly explained IN WRITING in the lease. Although 30% additional square footage is an awful lot square feet to add for the "common factor" and include it in the total square footage, it could potentially have an honest explanation.  Ask the landlord to explain the issue in detail.

Beware; it is not uncommon for the party responsible for trying to get away with this practice, to begin taking retaliatory action against you or your business to deter you from wanting to push for the refunds that you(and perhaps the other tenants) are due.  You will need to hire and attorney if this happens.  

For instance, within days of simply asking the landlord about this overcharge, some tenants receive letters asking for them to immediately provide copies of the insurance policies stipulated that are to be held by the tenant over the term of the lease.  Sometimes, if a lease says that the landlord has the right to determine where the tenants must park, a landlord will ask you to begin parking in a distant area.  You should also know that if several of the tenants discover they have this problem and challenge the landlord to refund large amount they have been overcharged, a landlord will go to one of the tenants in the group asking for a refund and tell the tenant he will pay them  their refund immediately and lower their base rent in the future if the tenant will tell them what your group of tenants is planning and help them weaken the challenge.

I hope I have not made this question more difficult to understand than necessary.   Please feel free to ask me any other questions in this matter.

Good luck in your efforts.

-Jim