How Apartment Owners Should Structure Operations Costs in Retail Leases

Retail is becoming a standard on the bottom floor of apartment communities, and while the storefront looks like any other, there are key differences in how the operations expenses, like property taxes and insurance are charged for retailers in apartment communities versus shopping centers.

“Operating expenses in a multi-family project that are passed-through to the retailer should be dealt with differently than in a conventional shopping center because many of these expenses do not benefit the retail tenants,” Gary Glick, a partner with Cox, Castle & Nicholson, tells GlobeSt.com. Glick says that there are two standard ways to properly cover operating expenses. One it is the pro rata share of all of the operating expenses for the multifamily project and the other is by reasonably allocating operating expenses attributed to the retail tenants.