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Financial Planning > UHNW Client Services > Family Office News

The Lease of My Worries

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I was in the process of moving my office and thought I had found the new place, until I hit a snag. I learned there’s much more than meets the eye when it comes to renting office space. Here’s how the events unfolded this past week.

I discovered an office with 949 square feet in a four-plex. My space was going to be the office on the left. Inside was an executive office, two slightly smaller offices, a receptionist area, a private bath, and a small kitchenette–everything I was looking for. Everything, that is, until I read the lease.

The price per square foot was attractive at just over $10.00 per, with a total rent of $825 per month. Add to this a CAM (common area maintenance) charge of $1.25 per square foot, or about $98 per month ,and my total monthly outlay would have been $923. I was mentally prepared for that.

When I met the real estate agent to sign the lease, she presented me with a 14-page document. Fourteen pages? I thought I’d better read it over first. I took it home and found several issues. I’ll jump right to the point. One of the major items was the property taxes I would have been required to pay. I would have occupied 35% of the total space and would have to pay that same percentage of the total property tax, or ad valorem tax, as it was stated in the lease.

Ad valorem tax? Sounds like jargon to me. Well, the other issue was the general liability insurance I would have been required to purchase. Seems to me the owner of the building would have been the one to buy this. So when you factor in these additional expenses, it wasn’t such a good deal after all.

Lease 101

There are several types of commercial leases. There’s a gross lease where you pay one monthly rate and everything’s covered. That includes your utilities…everything. There’s a “net” lease which is what I was facing. This type of lease requires the tenant to pay several additional items and favors the landlord. Then there’s the ol’ “triple-net” lease. In it, the tenant pays just about everything. Be very careful to read the lease carefully.

I’ve decided not to rent that particular space and it’s a good thing. You see, I’ve found a better space in the very best part of town. I will occupy a 640-square foot office for about six weeks until the new building is completed right next door. Then on or around October 1st, I’ll move into the entire bottom floor and have about 850 square feet of space. It’s absolutely the perfect location and layout!

I’ll keep you posted.


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