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Do Your Premises Measure Up?

When a building is constructed, the premises areas indicated by each lease are calculated on the architect’s drawings. Often the drawings do not accurately represent the real “as built” premises area measurement. Further, many premises are altered from time to time after the original building was erected, adding to the probability of a premises area measurement error.

You know for sure your premises area is incorrect if the last one or two digits are zeros. What’s the probability of space being exactly 1100 square feet compared to 1187.5 or some other more exact value?

It is very unlikely your landlord will tell you that you are overpaying rent!

Our experience is that most leases include an “approximate” premises area, which is very important to you as a tenant since the rent is calculated based on the number of square feet in the premises. For example, at a base plus additional rental rate of $50 per square foot, an error of 50 square feet equates to $2,500 per year, $25,000 over 10 years, $75,000 over 30 years.

A word of caution here. It’s important to remember that if the figure indicated by the lease is less than the actual area, you may be underpaying rent.

Here’s a simple, step by step process to check your lease for rent overpayment. If you get bogged down in a step, please call us for assistance.

  1. First, gather all your lease documents. These documents may include the original lease, any term renewal or extension documents, and any estoppel or lease amending agreements.

  2. Second, look at your lease to find:
    a.)   The premises area. Typically, this is clearly indicated on the first or second page following any title or table of content pages.
    b.)   The exact premises area measurement criterion (BOMA etc.). This may be described in the “defined term” section, or described in a paragraph in the main body of the lease, usually associated with the premises measurement value itself.

    Specifically, look for “BOMA” standards, or “the premises are measured from …”. The Building Owners and Managers Association (BOMA) is a standard set of measurement criterion. There are separate criteria for industrial, office and retail premises, subcategories within each type, and differing standards over time (various years in which the standards were evolved). You have to define which BOMA standard your lease refers to, and review that measurement standard to understand how your premises should have been measured.

    If your lease indicates that the premises are measured from one surface to another, you can go directly to the measurement step.

    You also want to determine if the area of your premises is “grossed up” which means that your “usable” premises area is adjusted upwards to include a proportionate share of the common areas of the building (the “gross up factor”).

    Look in the remaining lease documents to determine if the premises area was ever certified or confirmed by any other means. Note: If you have signed an estoppel certificate which indicates an area measurement, you may have a hard time arguing that although you agreed with the lease then, you are now disagreeing with the lease.

    In any case, now you have your premises measurement standards and it is time to measure your premises.

  3. If you have “as built” plans, there will be measurement values indicated which can be adjusted to correspond to the criterion you have identified. If not, you should measure the space, which you can do either with a steel tape measure, or a laser, measuring each room and adding the room plus wall thickness measurements to come up with the length of the perimeter of the premises, and in turn the premises area.

  4. Once you have this actual area corresponding to the measurement criterion, you can determine whether the area expressed by the lease and in the additional rent statements, is correct.

  5. Calculate the difference. If there is a difference, is it significant? Is the area actually larger than was indicated by the lease, or is it smaller?

    If the difference is not significant, then you will have earned some peace of mind. Ten square feet at $50 per square foot is $500 per year, $5,000 over ten years. Decide whether this is worth fighting for. Perhaps you can make a note of it and adjust your rent and premises area at the next renewal. If the difference is significant you will need to think carefully about how to proceed. Consult an expert to determine how this could be addressed in a Lease Amending Agreement.
Written by
Ian D. Toms