Honey, Our Office Grew

You’re half way through your lease and you get your usual monthly statement. But there’s something wrong. At least you think there’s something wrong. You knew your rent would increase by three percent on each anniversary of the Lease but your recent bill seems to reflect a greater increase. Is that possible? Is it legal?

The answer is “Yes” and “Yes.”

Every few years, Building Operators and Managers Association also known as BOMA (http://www.boma.org/Pages/default.aspx) modifies the standards in which the owner of a building measures their property. Recently, they took on the task of modifying the 2010 standards. The result was that the rentable square footage of the building and your space may increase by as much as 3%.

But how can that be? The building didn’t grow. Well, it may just do that through some magical formula modifications.

One of the key items landlords look at in establishing the rentable square footage (“RSF”) upon which your rental rates is calculated is the building’s “Load Factor.” To arrive at this figure, the owner measures the actual square footage inside the specific suite. This is noted as the usable square footage (“USF”). They then look at the common areas of the building such as lobbies, hallways and other areas used by all the tenants. This portion of the building makes up the Load Factor, Simplified, that is each tenants’ share of the common areas. Thus, if the Load Factor is 15% on a 5,000 RSF space then your actual usable square footage inside your suite is only 4,348 USF.

However, if the Load Factor is somehow adjusted to 18%, then your USF of 4.348 now converts to 5,130 RSF. With that said, here’s a simple illustration of how that double bump can impact you.

How can that happen? In modifying BOMA standards this time around, certain areas of the building such as private balconies or other portions of the building previously not included now become part of that calculation. In addition, some areas of the building that had been underutilized but have now been converted to “amenities” the landlord creates even more useable common areas.

Can you protect yourself from this increase? Many leases have a clause that states the Landlord, at the Landlord’s sole option, can remeasure the building and make appropriate adjustments. If it’s called out in the lease, the landlord can arbitrarily make that adjustment. To protect yourself, add a simple clause to the lease that states, “Should the Landlord remeasure the Building during the Term, such adjustment may only take affect for any new term or renewal term.” Most landlords will take that course of action as normal customer relations but it is best to have it clarified in the lease document.

Yes, your space and grow but you can slow it down.