Problems with Inaccurately Defined and Measured Leased Premises


Although it may seem that accurately defining the leased premises in a lease should be a relatively straightforward task, we have recently witnessed several instances when the definitions and space calculations of the premises, building or shopping center have resulted in significant disputes. This article addresses some examples of the potential pitfalls of using leases which are not customized for a specific user and the importance of carefully defining terms related to the leased premises and its environs.

Definition and calculation of leased premises:

Landlords and Tenants must be careful when defining leased space for many reasons. First and foremost, many leases calculate rent on a per-square-foot basis. Inaccuracies in the definition of the leased premises could lead to the under-collection or over-billing of rent unless a lease is properly drafted to clearly state what controls in the event of inconsistencies. For example, some leases will state that a tenant is leasing 5,000 square feet at $20 per square foot for an annual rental amount of $100,000. In the event that it is determined that the leased premises consists of only 4,900 square feet, does the per-square-foot amount or the gross sum control? This can be especially important in build-to-suit situations where the exact square footage of the premises is dependent upon the completed build-out.

Many leases contain both a description of the premises as well as a depiction. What controls if inconsistencies exist? What happens if the depiction includes areas which are actually part of the common area or are leased by another tenant? If a lease contains both a description and depiction of the premises, it is essential that they be both consistent and accurate.

Some landlords and tenants may believe that they can avoid dispute by incorporating standards set forth by the Building Owners and Managers Association (BOMA) to calculate the size of leased space. However, it is important to note that BOMA issues standards for different types of properties and periodically updates those sets of standards. Therefore, a lease which merely states that the leased premises will be calculated using BOMA standards may still lead to conflict whereas a lease which states that the premises will be measured by the then current and properly applicable BOMA standards should help to avoid ambiguity.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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