Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

In the Spotlight: Beware of Operating Expenses Incurred Subsequent to the Lease Term

By William R. Crowe
August 18, 2003

Most leases that provide for a pass-through of operating expenses to tenants provide for an equitable proration of such expenses for any partial lease year. The typical language provides that the tenant is liable for its proportionate share of operating expenses incurred by the landlord for any period during the lease term. The arithmetic is very simple ' if the lease expires on March 31st, the tenant is responsible for its share of expenses incurred by the landlord through March 31st. Some leases, however, have a more ambiguous, and from the tenant's perspective, troublesome, proration clause that provides in effect that the tenant is liable to the landlord for its share of all operating expenses incurred by the landlord during the entire calendar year during which the lease expires prorated on the number of days or months of the lease term during such calendar year. So if the tenant's lease expires on March 31st, and the landlord incurs a significant operating expense in September, the tenant is liable for one-fourth of its share of such expense, notwithstanding that the expense was incurred and paid subsequent to the end of the lease term. These provisions may often work unfairly to the landlord's advantage and the savvy tenant should carefully vet and negotiate any such clauses before executing a lease.


William R. Crowe is a partner at Mayo, Gilligan & Zito, LLP in Wethersfield, CT.

Most leases that provide for a pass-through of operating expenses to tenants provide for an equitable proration of such expenses for any partial lease year. The typical language provides that the tenant is liable for its proportionate share of operating expenses incurred by the landlord for any period during the lease term. The arithmetic is very simple ' if the lease expires on March 31st, the tenant is responsible for its share of expenses incurred by the landlord through March 31st. Some leases, however, have a more ambiguous, and from the tenant's perspective, troublesome, proration clause that provides in effect that the tenant is liable to the landlord for its share of all operating expenses incurred by the landlord during the entire calendar year during which the lease expires prorated on the number of days or months of the lease term during such calendar year. So if the tenant's lease expires on March 31st, and the landlord incurs a significant operating expense in September, the tenant is liable for one-fourth of its share of such expense, notwithstanding that the expense was incurred and paid subsequent to the end of the lease term. These provisions may often work unfairly to the landlord's advantage and the savvy tenant should carefully vet and negotiate any such clauses before executing a lease.


William R. Crowe is a partner at Mayo, Gilligan & Zito, LLP in Wethersfield, CT.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Removing Restrictive Covenants In New York Image

In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?

Fresh Filings Image

Notable recent court filings in entertainment law.