Commercial tenants typically pay rent based on calculated area figures stated in their lease or contract with the landlord. Disputes over these calculations can arise for various reasons, often stemming from outdated space measurements, a lack of formal documentation, poorly defined area definitions, or misunderstandings regarding the method of calculation. While most disputes can be resolved in good faith, some tenants take legal action against their landlords for misrepresenting area, and seek damages retroactively.

Outdated or lacking documentation

When lease area calculations appear to be outdated, undocumented, or otherwise unsupported, tenant confidence in the landlord's numbers can suffer. This is especially problematic if the landlord is unable to produce as-built plans, area analysis charts, or area certificates to support their figures. Without proper documentation, tenants may grow suspicious of the landlord's calculations and attempt to measure the property themselves, or hire an independent firm to verify the area. If the area doesn't match, this can lead to disputes and, in some cases, legal action to reclaim lost rent.

Poorly defined area definitions

Definitions for Rentable Area, Gross Leasable Area, and/or other important leasing figures are often written directly into lease contracts. In some cases, these definitions are well articulated, while in others they are vague, simplistic, or absent. Some leases reference industry measurement standards like BOMA, ensuring clarity and consistency, whereas others omit formal area definitions altogether. This can pose a significant liability to landlords, as ambiguities in lease area definitions can lead to disputes, with tenants questioning the landlord and the methodology used. Clear, concise lease language that references modern industry standards is the best practice in order to minimize risk and ensure that concerned parties are aligned with respect to area calculations.

Misunderstood calculations

While industry standards such as those established by BOMA provide a valuable framework for measuring and calculating areas, their application can be complex and easily misunderstood by non-experts. BOMA Standards involve detailed guidelines for measuring to specific wall surfaces, including or excluding certain spaces, and pro-rata allocations of common areas. Tenants often overlook these complexities and attempt to estimate area using rudimentary methods, such as counting ceiling tiles, floor tiles, or applying basic area approximations. Such attempts can result in unfounded disputes over area, further underscoring the importance of maintaining current and professional as-built documentation.

The 2% rule

BOMA standards do provide some guidelines with regard to area disputes. They indicate that a 2% difference between two independent measurements is acceptable, and anything over 2% should be resolved by a third party. Although the 2% rule is specific to BOMA, it has become the broadly accepted industry standard for measurement discrepancies.

Takeaway

Landlords with a proactive due diligence program and well-maintained documentation, like as-built floor plans, calculation charts, and area certificates; can prevent most area disputes from arising in the first place. However, if a dispute does occur, hiring an unbiased professional measurement company like Extreme Measures can help to clarify and resolve issues before tenants escalate further.