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“The responsibilities of a commercial tenant differ greatly from those of a residential tenant. Negotiations regarding each of the landlord’s and tenant’s responsibilities can become an obstacle, potentially delaying the execution of a lease. In a residential building, the landlord is usually responsible for all carrying costs of the building; a landlord might even cover gas and water fees for the tenants of the building.”
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However, in a commercial lease, many of the building’s carrying costs get transferred to the tenant as “Additional Rent.” Additional rent consists of fees that the tenant is responsible to pay on top of their base rent. It includes fees like real estate taxes, maintenance fees, insurance fees and other miscellaneous fees. Although the landlord is technically responsible for these costs, each tenant of the building pays their proportionate share of the additional rent.
Furthermore, a tenant in a commercial building is going to be responsible for all costs and occurrences related to the interior of the rented space. This includes all utilities, the HVAC systems, floors, walls, and any construction within the rented premises. In addition to the tenant’s base rent, and additional rent, the tenant will also be responsible to maintain and pay for their own personal property insurance for items such as equipment and inventory, as well as liability insurance for accidents that may occur.
Even the responsibilities for maintenance and repair in the building will be shared between a landlord and tenant. Generally, a landlord is responsible for the exterior of the building including the roof, exterior walls, and removal of all snow and debris on the sidewalks surrounding the building.
Sometimes, depending on the size of the building and number of tenants, a landlord may shift even these responsibilities onto the tenant. Landlords may even reassign their responsibilities to comply with the American with Disabilities Act (ADA) and Department of Buildings (DOB) requirements onto tenants, which could cost upwards of $10,000 at times. It is also standard for a tenant to be responsible for removal of hazardous waste and compliance with any applicable environmental laws.
It is important for a broker to note how many other commercial tenants there are in the building, in addition to your client. This way, the broker can identify what types of things listed here the tenant will be responsible or liable and what the landlord must cover. An educated broker can give the tenant a more realistic understanding of what to expect.