Saturday, May 1, 2010

Rental Terms & Calculations as a Tenant or Owner

Total Rentable Area, Usable Area & Common Area

Here's something you need to learn whether you are a tenant or the landlord. If you measure a building from the inside rough walls before you add the interior, it would give you the Gross Measured Area (GMA). But... the building will have stairways, elevator shafts and vents. The landlord does not charge for this space. Things that penetrate the floor are subtracted from the GMA to give you Total Rentable Area (TRA).

The interior measure of the walls in each space, will give you the Total Useable Space in each space (TUS). With this information we can 'crunch' some numbers and find out the efficiency of the building being measured.

Total Useable Space divided by Total Rentable Space equals Efficiency Percentage.

Example: TUS 13,500sqft / TRA 15,000sqft = 90%. In this example the building is ninety percent efficient. You can look at it other ways too. TUS 13,500 / E% 90% = TRA 15,000.

Again whether you are the tenant or landlord you need to understand the COMMON AREA and how that expense is allocated from the landlord to the tenant.

Within the TRA are areas 'common' to all tenants, like hallways, the lobby, fire corridors, the mail room, public restrooms, and vending or break rooms. Tenants share this space and are charged based on their prorated percentage of Total Usable space(TUS) in the building.

We can calculate the number by using the other numbers mentioned earlier. Total Rentable Space less Total Usable Space equals Common Area Space. The landlord will incur some costs to maintain this space, CAM common area maintenance. Generally the expenses for cleaning, repair on this area as well as the same on the parking lot , snow removal, painting the building, new roof etc, are also allocated to this category.

Example: assume that one office on the first floor has 4,500 sqft of TUS. That particular space will share the common expenses of the whole building on their percentage of the building's Total Usable space. Tenant TUS divided by Building TUS = Tenant percent of TUS. TTUS 4,500 / BTUS 13,500 = 33.33%. If the Shared expenses to maintain the common areas is $10,000 then this particular tenant on the first floor will be charged one third of it. $10,000 X 33.33% = $3,333.33.

Often when renting, CAM is quoted as a price per square ft. In this example, $3,333.33 / 4,500 sqft = $.75 per sqft. (or 75 cents per sq ft

Please note there are many types of leases, and many types of expenses to be shared or paid by the tenant and or landlord. This example is purely for you to learn how to calculate some of them.

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