Real Estate

A Load Factor becomes necessary when the Tenant uses a certain square footage inside their offices, but also shares in the hallways, bathrooms, elevators, lobby, etc. Therefore, a calculation is done to determine how much of the building’s space is devoted to these common areas, and that “Load Factor” is added in to the Tenant’s square footage. In other words, if twenty percent of the building is devoted to common areas, then twenty percent more footage is added to the Tenant’s “usable” area.

GROSS LEASE In this type of lease the tenant pays the landlord a gross amount for rent, plus sales tax where applicable. The landlord then pays the property’s operating expenses such as property taxes, insurance, and management or maintenance costs from the income he receives.

The Tenant may be responsible for electric, telephone, and possibly water & sewer charges depending on the verbiage of the lease document. This type of lease is more common for office users or in older buildings where utilities may not be separately metered.

With some gross leases, the landlord may put an expense stop provision in the lease. In this type of clause the tenant pays the excess over a specified ceiling on operating costs. NET LEASE  Most common with today’s commercial properties, the Net Lease directs the tenant to pay the landlord a “Base Rent” which is net of property expenses, PLUS an additional amount for tenant’s share of the property’s expenses such as property taxes, insurance, common area maintenance (C.A.M.), management, etc.