Leasing Definitions: Definition of Additional Rent

Glossary of Commercial Lease Terms—Additional Rent

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Additional rent can be a tricky issue in commercial leasing. The term refers to things that a tenant might be charged for that are not included in usable square footage or other rent costs. These costs might include after-hours services, HVAC, common area maintenance or CAM fees, percentage rent, and any other costs that the landlord deems are not included in base rent.

For example, Jenna's Jewelry and Jems (JJJ) might take over space in the mall for a base rent of $4,000 per month, but JJJ must also pay a percentage of their monthly sales as required in their less as "additional rent."

Common Components of Additional Rent

Insurance on a property is a common add-on in an additional rent clause. Some landlords also expect tenants to pick up the costs of taxes, maintenance like snow and ice removal, security services and equipment such as surveillance cameras, and maintenance and repairs of the premises. 

These are all typically costs associated with the property's safety and upkeep, but additional rent can include other things as well. Late payment fees are common, as is a percentage of sales, particularly when the tenant is a retail business

The Downside of Additional Rent 

Additional rent is most commonly found in triple net leases, those were pretty much all the expenses associated with premises are passed on to the tenant. This might be fair or not so fair, depending on the commercial space you're renting.

If you're leasing a standalone building and you're the only tenant in there, that's one thing, but if you're sharing a building with other tenants, issues of use can arise.

Are you or your business really responsible for all the costs that are being passed on to you? What if another tenant causes damage to the parking lot but your lease includes a pro rata share of these costs as additional rent? Additional rent can often turn out to be more than what you're paying in base rent.

Additional Rent Is Often Negotiable

Because additional rent is often composed of several different costs and percentages, one or more of them may be negotiable. Don't assume that simply because a landlord or management company is asking you to pay for X, Y and Z that it's a foregone conclusion that you must do so or move on to look for another property. In the case of JJJ, the owner might negotiate the percentage of sales downward, or you might ask for a ceiling or limit beyond which these additional rental amounts can't accrue, whether monthly or yearly. At the very least, you should ensure that you have a right to dispute any extra charges presented to you, ideally before costs are incurred. 

Take Precautions 

Have an attorney look over your lease if you're uncomfortable with any aspect of the additional rent mentioned in its terms. You might also want to make sure that all possible components of additional rent are clearly defined and spelled out. 

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