In an effort to re-coup operating expenses and provide for inflation, building owners do one of two things: either they quote a higher rate which they think will cover all of these things, or they quote a lower price and bill the tenant directly. Sometimes they quote a price somewhere in the middle that includes only some of the things on the chart below. The following are ESTIMATES based on typical conditions in Lincoln.
|Office Buildings||Retail Buildings||Warehouses|
|Maintenance||$1.00-$3.00||$1.00 to $3.00||.50|
GROSS — A rate quoted by the landlord that covers all of the operating expenses. In cases like this, the landlord typically also contracts for the services. Landlords usually guess high to cover themselves.
NET—The quoted rent contains only some of the operating expenses listed above, and tenant and agent must inquire as to what additional operating expenses will be added to the quoted price. Frequently heard terminology to explain this is semi-gross, modified gross, or semi-net.
TRIPLE NET — Tenant and agent must inquire as to what all of the additional operating expenses are to be added to the quoted price. Most of the time, the tenant also contracts for the services as well, though sometimes the landlord selects the contractor and bills the tenant back. This is the most precise, accurate way to bill the additional expenses.
CAM CHARGES — Technically, this means Common Area Maintenance charges: parking lot repair, snow removal, lawn care, cleaning and maintenance of common halls, etc. However, in Lincoln, the phrase is sometimes used as a catch-all to mean the same thing as Triple Net.
EXPENSE STOPS — This means the landlord will agree that the rent covers up to a certain amount of the operating expenses; they are capped. Usually there are more, and the tenant must pay for the overage.
PASS THROUGHS — The landlord must budget for increases in inflation in taxes and other expenses. Sometimes a lease has a clause stating that INCREASES can be passed through to the tenant.
INCREASES OVER BASE YEAR — This means that Year 1 of the lease is used as a guide for pass throughs; charges in subsequent years that exceed that are billed to the tenant.
A landlord will re-coup the operating expenses by sending the tenant a bill at the end of the year, or when the expense actually occurs. Sometimes a landlord will estimate what the triple net bill might be, raise the rent and charge the same number each month (like a tax escrow for a house), then adjust accordingly at the end of the year.