The amount owed by a commercial tenant
in addition to base rent that represents the
proportionate share of operating costs as
defined within the lease document.
Additional rent, commonly found in
office and retail store leases, is typically
estimated at the commencement of any fiscal
or calendar year for the building with the
tenant paying equal monthly installments in
advance throughout the period for which the
estimate is made. However, if the taxing
authority (municipality) requires the full
payment of realty taxes over the first
portion of a year, the tenant in most leases
is obligated to pay the entire taxes during
that portion of the year.
The sum of base rent and additional rent
constitutes the rent. In most leases,
amounts above the base rent are referred to
as additional rent and are usually made up
of operating costs, property taxes, and
utilities. Arrangements will vary depending
on the specific lease.
The landlord normally estimates the
tenant’s proportionate share as a percentage
using the tenant’s rentable area as
numerator and rentable area of the building
as denominator. The landlord typically
provides a statement of actual amounts
payable by the tenant along with supporting
details following the fiscal or calendar
year end. If monies are owed, the tenant
remits the deficiency; any surplus is
credited to the tenant’s account.
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