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Can a Tenant Really Protect Against Inefficient Operating Costs?

Industrial and office building leases frequently require that the tenant pay all or some portion of the landlord’s operating expenses to maintain the center in good operating condition. Sources take a closer look at the topic in this EXCLUSIVE commentary.

In today’s competitive real estate market where the cost of utilities and infrastructure use are always rising, shopping centers (whether mall or strip), industrial and office building leases frequently require that the tenant pay all or some portion of the landlord’s operating expenses to maintain the center in good operating condition. That is according to Dina Tecimer, a partner in the real estate and land use practice group at Manatt, Phelps & Phillips LLP. She, along with Tom Muller, a partner in the same group in the L.A. office, say in the exclusive commentary below that landlords usually prepare the proposed lease, frequently on one of the standard forms with an addendum attached containing the more deal specific business terms. “The landlord prepared lease will include broad language encompassing ‘operating expenses” which, more often than not, will include real estate taxes and insurance.”

The views expressed below are the author’s own.

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Natalie Dolce

Natalie Dolce

Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.

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