Does a Landlord Have the Right to Increase the Operating Expenses if a Tenant Moves Out?


Steve Freeman: I’m sitting with Steve Katkov of JUX. Let’s say that a tenant moves into a retail space in a strip mall. And there are ten spaces. They’re all full. This tenant makes the last space, completely full. There are x amount of operating expenses for the property, and everybody’s paying pro-rata. So what happens if two other tenants move out? Would the landlord then have the right to be able to increase those operating expenses pro-rated to everybody so that he doesn’t have a loss?

Steve Katkov: That’s a great question. The business reality, if you will, the culture of commercial leasing would not allow that. The loss of revenue to the landlord is a risk the landlord assumes. Rarely will we ever see a landlord propose a lease agreement that pushes that loss of that one tenant’s pro-rate share onto the other tenants. It’s very rare, and a tenant should never agree to that provision.

Steve Freeman: So that would be something for a tenant to look for in a lease, to just make sure that they’re not paying that additional share.

Steve Katkov: Correct.