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EVERYTHING YOU WANTED TO KNOW REGARDING COMMERCIAL REAL ESTATE LEASE ESCALATIONS

EVERYTHING YOU WANTED TO KNOW REGARDING COMMERCIAL REAL ESTATE LEASE ESCALATIONS. Presented by: Gary M. Albrecht, Esq. Jan Alan Lewis, Esq. September 24, 2013. Basic Concepts. Definition of “Additional Rent” Includes all sums and charges other than base/fixed rent Escalations are a subset

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EVERYTHING YOU WANTED TO KNOW REGARDING COMMERCIAL REAL ESTATE LEASE ESCALATIONS

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  1. EVERYTHING YOU WANTED TO KNOWREGARDING COMMERCIAL REAL ESTATELEASE ESCALATIONS Presented by: Gary M. Albrecht, Esq. Jan Alan Lewis, Esq. September 24, 2013

  2. Basic Concepts Definition of “Additional Rent” Includes all sums and charges other than base/fixed rent Escalations are a subset “Without offset/set-off, deduction, abatement or reduction” Remedies re: non-payment

  3. Basic Concepts (Cont’d) Interest Maximum rate permitted by law Late Fees Other Fees (e.g., “bounced” checks)

  4. Operating Expenses/Common Area Maintenance (CAM) “Gross” vs. “Net” Base Year Definition (Landlord’s perspective)

  5. Operating Expenses/Common Area Maintenance (CAM) Cont’d Exclusions (Tenant’s perspective) Capital repairs, replacements or improvements Building expenses/roof Compliance with laws Management fees Going “green”/LEED certification Administrative charge Insurance premiums Terrorism Earthquake Flood

  6. Operating Expenses/Common Area Maintenance (CAM) Cont’d “Pools” Garbage After-hours lighting Pylon “Fast Food” Tenants Estimated/Reconciliation Dispute/Audit Contingency fee Time period

  7. Operating Expenses/Common Area Maintenance (CAM) Cont’d “Gross-Up” “Cap” All vs. “Controllable” “Bumps”/fixed increases in lieu of Fixed CAM (with or without “controllables”)

  8. Real Estate Taxes “Gross” vs. “Net” Base Year Decrease/“Backbilling” Definition (Landlord’s perspective)

  9. Real Estate Taxes Cont’d Exclusions (Tenant’s perspective) Rent taxes Upon sale or transfer Proposition 13 Assessments Representations and warranties Estimated/Reconciliation Dispute Right to appeal/indemnity

  10. Percentage Rent Definition (Landlord’s perspective) Natural “breakpoint” Gross Sales Exclusions (Tenant’s perspective) Non-retail sales

  11. Cost of Living (CPI) Base Year or Base Month Price Index Equalization Factor Frequency Cumulative vs. Non-Cumulative/Simple “Cap”

  12. Miscellaneous Electricity Submeter/Landlord’s profit Rent-inclusion/dispute Direct meter Promotional Charge/Merchant’s Association Media Fund/Advertising Charge

  13. Miscellaneous Cont’d Trash Removal Charge Barricade Charge Security Charge Water Sprinklers Insurance

  14. Miscellaneous Cont’d Fuel/Energy/Steam Porters Wage Change in Laws Sales or Use Taxes

  15. Conclusion/Questions?

  16. Contact Information Gary M. Albrecht, Esq. Co-Chair and Member, Real Estate Department (201) 525-6226 galbrecht@coleschotz.com Jan Alan Lewis, Esq. Member, Real Estate Department (201) 525-6228 E-Mail: jlewis@coleschotz.com

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