The pandemic will no doubt bring unprecedented changes—many of which are still yet to be realized. Office landlords, however, can get a jumpstart by revisiting some common lease provisions that the pandemic has made outdated. While many people have focused on the force majeure clause in leases, other provisions like operating expenses and base year calculations should also be revisited.
"In addition to force majeure, a concept that many people have become familiar with over the last few months, there are several other typical office lease provisions that may need to be revisited to account for COVID-19 issues," Andrew Ouvrier, partner at Cox, Castle & Nicholson, tells GlobeSt.com. "Operating expenses, base year calculations, casualty/destruction, and rules and regulations are all lease provisions that require additional scrutiny, and possibly modifications in an effort to minimize negative and unforeseen impacts of COVID-19."
Operating expense provisions are among the top elements of a standard lease that should be revisited. "Operating expenses are the costs incurred by office building landlords for the operation of their buildings, which tenants typically reimburse through the payment of additional rent," says Ouvrier. "It is common for there to be limits on what costs a landlord can include in operating expenses. Due to COVID-19, many office landlords have incurred substantial costs in implementing operational and physical upgrades to their buildings in order to comply with governmental requirements, and public health and safety recommendations. If possible, those landlords will want to be able to include those costs in operating expenses."
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