In today's competitive real estate market where the cost ofutilities and infrastructure use are always rising, shoppingcenters (whether mall or strip), industrial and office buildingleases frequently require that the tenant pay all or some portionof the landlord's operating expenses to maintain the center in goodoperating condition. That is according to Dina Tecimer, a partnerin the real estate and land use practice group at Manatt, Phelps& Phillips LLP. She, along with Tom Muller, a partner in thesame group in the L.A. office, say in the exclusive commentarybelow that landlords usually prepare the proposed lease, frequentlyon one of the standard forms with an addendum attached containingthe more deal specific business terms. “The landlord prepared leasewill include broad language encompassing 'operating expenses”which, more often than not, will include real estate taxes andinsurance.”

The views expressed below are the author's own.

The tenant can protect itself by seeking a general caveat addedto all leases – that an expense can only be those reasonablynecessary to maintain the project in 'safe, clean and goodoperating condition. Second, an informed tenant will seek anaudit right of the landlord's books and records with a negotiationrevolving around the cost of such audit. Rarely is this auditright used but the risk of an audit frequently deters sharplandlord practices.