Additional Rent in a Commercial Landlord and Tenant Proceeding – an Excerpt from Michelle Itkowitz’s Lawline CLE on Landlord and Tenant Litigation in New York
October 5, 2017
On October 3, 2017, Michelle Maratto Itkowitz taught Session 4 of a seven-part continuing legal education program for Lawline on Landlord and Tenant Litigation in New York. Session 4 was “Commercial Landlord and Tenant Law – Special Issues”.
Commercial landlord and tenant law is sophisticated commercial litigation and needs to be approached as such. In this Session 4, we examine the many commonly litigated issues in commercial landlord and tenant law, delving into the many subtleties that make the area particularly challenging, including Yellowstone Injunctions and Good Guy Guaranties.
HERE IS A CLIP – How Good Guy Guaranties Have Evolved with special guest Jay B. Itkowitz.
And below is an excerpt from the 41-page, 45-footnote materials, which accompanied this program:
If notices were sent to the tenant regarding the computation of additional rent, these should be examined before drafting the papers, and brought to court for trial as well. In the commercial context, unlike the residential, there is regular monthly rent, and then there is also “Additional Rent” – payments that the tenant has to make the landlord for all kinds of other items. Usually these things are priced outside of the rent because they are changeable and unpredictable. For example, electricity or real estate tax escalations. If the taxes on the building go up over the years, commercial tenants agree to shoulder a portion of the increase. Extra charges for repairs and key cards are also additional rent.
When I see additional rent in a case, I have three questions.
1. Is the additional really due?
Is the additional rent really due? For example – I have seen landlords try to bill tenants for things they shouldn’t be entitled to. Like trying to bill building-wide architectural fees to a tenant as “repairs.” You need to check the lease for the authority to bill the item as additional rent.
2. If the additional rent is really due, was it calculated in a defensible way?
If the additional rent is really do, was it calculated in a defensible way? Many of these items require a little math. For real estate tax escalations the lease usually says subtract the base year from the current taxes and then the tenant pays a percentage, usually commensurate with their percentage of the building. I like to make sure they did the math right.
3. Was the additional rent billed correctly?
Was the additional rent billed correctly? Unlike regular monthly rent, which is usually due without demand as per the lease, Additional Rent does, indeed, need first to be billed. How else would the tenant even know it was due. Thus, tenant needs to be billed in accordance with whatever the lease says about such things. Many leases say something like the landlord needs to present tenant with a bill for additional rent and tenant gets 10 days to pay and some leases even say how that bill has to be sent and who it has to be sent to.