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Advice on Avoiding Misunderstandings in Premises Measurement
What could be simpler, more mundane, and less worthy of a lawyer's attention than lease provisions dealing with a business term ' the square footage of the premises? However, a lawyer's failure to define the agreed-upon method of its measurement properly in the lease can lead to headaches and even litigation as the lease term progresses. Because measurement standards are not mandatory or legislated, the parties are free, depending on their relative market positions, to agree upon the method to be used in the lease. Often the measurement of square footage is referred to in terms that are imprecise and have no legal definition. Depending on the area where the building is located, measurement methods may vary and a landlord may have its own method that is a modified form of a particular standard of measurement. Without a specified measurement standard and the right to confirm a landlord's measurement, a tenant could end up paying more for its space than it intended (or budgeted); and may later find itself unable as a practical matter to contest a landlord's measurement of an expansion space.
When a landlord and tenant contemplate entering into a lease, one of the first business terms they discuss is the number of square feet that will comprise the premises. The square footage of the leased premises is of extreme economic importance in several instances. First, square footage is typically used in calculation of base rent, whether so stated in the lease or not. Second, the tenant's proportionate share of operating expenses for a multi-tenant building is determined based upon the ratio between the square footage of the premises and that of the entire building. Third, any tenant improvement allowance will normally be based upon the number of leased square feet.
The question of measurement comes into play in various ways during the drafting and negotiation of a lease. The parties must first agree to the square footage of the premises prior to entering into the lease. If the premises are shell space to be built out, both parties may desire the ability to re-measure the square footage of the finished space. Finally, if a lease includes the tenant's right to expand into adjacent space, the method of measuring and defining the expansion space must be specified in the lease to prevent later disagreements about the expansion square footage.
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