Negotiating Texas Commercial Lease Pass Through ExpensesBy James Blake on
Commercial leases in Texas vary widely, and commercial lease negotiation requires understanding of the types of commercial leases and the risks that landlords and tenants face. There’s no such thing as a “standard commercial lease,” and what you don’t know about your lease could hurt you.
Commercial landlords and commercial tenants should be aware that operating expenses, including real estate taxes, insurance, common area maintenance (CAM), major repairs, improvements, etc., can be structured in many ways. Advice from a Texas commercial real estate lawyer is essential to identify risks, protect your interests, and get you the best terms in Texas commercial lease negotiation.
Fixed & Variable Commercial Lease Pass Through Expenses
A Texas commercial lease may require a commercial tenant to pay pass through expenses based upon fixed or variable costs. Texas has no standard for commercial lease pass through expenses. In some cases, a commercial tenant may simply pay a fixed amount for expenses such as common area maintenance (CAM) or insurance.
Other times, operating expenses paid by a commercial tenant can be variable. For example, a commercial landlord might pay a base amount of the cost of CAM or other expenses, and require the commercial tenant to pay for costs exceeding the base. Alternatively, a commercial tenant may pay it’s pro rata share of all CAM, real estate taxes, landlord’s insurance, and other expenses based upon the square feet of the commercial property.
Commercial Lease Negotiation & Pass Through Expenses
Beware of a commercial real estate agent or broker who says that your Texas commercial lease is “standard” and not in need of scrutiny. Unless you have significant experience dealing with Texas commercial leases, you may be unaware of hidden risks and costs in your commercial lease agreement. It’s wise to consult with a Texas real estate lawyer to make sure that that the commercial lease agreement works for you.
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