Shared Expenses in a Commercial Lease

In a commercial net lease, tenants will need to pay more than just the rent. Operating costs, insurance and taxes will be divided up between the landlord and the tenants. When negotiating a commercial net lease, these shared expenses should be thoughtfully negotiated and clearly spelled out to avoid disputes which can be costly.

Since these expenses are often a very large part of the overall cost of the lease, tenants would be wise to carefully negotiate every single expense. The big ones include:

Maintenance/Operating Costs. Tenants and landlords will need to negotiate what maintenance and upkeep "passes through" to the tenants, and what is paid by the landlord. Additionally, in multiple tenant buildings, tenant expenses will need to be divided between the tenants.

Property Tax. Taxes are similarly divided between tenants and the landlord, but there are many different ways to calculate who pays what.

Insurance. Both landlords and tenants will want property and casualty insurance (to protect the premises and property) as well as general liability insurance (in the case of injury to an invitee to the property). How these insurance costs are allocated is all negotiable.

The articles below discuss in detail the options for dividing shared expenses among the tenants and the landlord.