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11/10/2008 09:57:05
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Subject: Standard for pro-rating when tenant is in a space for only part of the year
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Elizabeth Scott
Joined: 10/03/2008 08:08:12
Messages: 206
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Question from John:
"Our Lease Administrator quit on January 7 - Just in time to miss out on CAM recs. I can use some advice.
Is there a standard for pro ration of the year when a tenant is in a space for only a portion of the year? Here is an example:
Tenant Moves in April 1 and occupies 10% of the building. There are extraordinary (equal to an entire year's budgeted snow removal expense) snowfalls in late March. Those bills were paid in April. Do you:
A) Bill the year's expenses and prorate the year's expenses based on 8 months over 12 months? Let the chips fall where they may and tenant pays their share.
B) Bill on actual expenses PAID from April 1 - Dec 31? Trying to be fair.
C) Bill on actual expenses and events that HAPPENED between April 1 - Dec 31. Trying to be really fair but cause your lease administrator to quit because of the work load.
D) Prorate for 8/12 months and credit back the tenant's portion of the unusual snow event that they were not there for anyway. Overly(?) fair to the tenant and opening the door to many exceptions and potential brain damage.
E) Assuming the tenant is a bar, suggest you work it out over some beers? (just kidding, of course)
The lease states only that a tenant pays "prorata share of expenses". Our standard is that we will also rec their account when they move out within 20 days, so it is possible that the opposite can happen, that it snows hard on their last day but we are not invoiced in time to get their fair share of that expense.
John"
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11/10/2008 09:58:17
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Subject: Re:Standard for pro-rating when tenant is in a space for only part of the year
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Elsie Hermann
Joined: 09/25/2008 21:54:44
Messages: 202
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Comment from Alan Alexander:
"Generally, expenses are set up on an annual basis. If a tenant moves in in April, he or she would pay 9/12th of the expenses regardless of when they were incurred. As long as one is consistent with the approach, no one can say you worked the expenses to the landlord's benefit. That is the approach I would take.
Let me know if I can be of any further help.
Alan Alexander"
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11/10/2008 10:01:06
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Subject: Re:Standard for pro-rating when tenant is in a space for only part of the year
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Jeffrey Laass
Joined: 09/29/2008 08:49:58
Messages: 73
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I agree with Alan's assessment based on "tenant paying pro-rata share". The pro-rata share is a portion of all of the operating expenses for the year so you have to take all of the expenses pertaining to the year, some may have been paid in 2006 for 2007 and some were probably paid in 2008 for 2007, and figure out their share, either by month or days of the year, but do it consistently year to year.
Jeff
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05/09/2010 12:40:14
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Subject: Re:Standard for pro-rating when tenant is in a space for only part of the year
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TAWNY SCHNURBUSCH
Joined: 05/09/2010 11:10:21
Messages: 4
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In all fairness, the tenant should only pay going forward the CAM prorata share that has already been established during the previous reconciliation. Reason would say that you can't charge for something that they did not use or benefit from. Whatever you decide, consistently apply as this will surely come up in the future. And, what was the policy with your previous admin? I would stay with that.
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06/21/2010 17:29:36
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Subject: Re:Standard for pro-rating when tenant is in a space for only part of the year
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Kellie Mangino
Joined: 11/13/2009 10:41:02
Messages: 1
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John,
I don't know if there is a standard for pro-rating in these cases. We have have dealt with this several times and found that it is fair and more simple to figure the expenses for the months that the tenant occupied and reconcile against these only. Meaning, if there was a snowfall in March and the snow removal bill was paid in April, that expense is passed on to the tenant as a NNN. In some cases (and depending on how the leases are written regarding capital improvements), you may alter this way of pro-rating. If you paid for a fairly expensive property improvement in the month that the tenant was vacating, you may want to check with the owner to see how they suggest you handle the NNN reconciliation. Typically the owner will not treat this as a NNN expense for this tenant since it is going to benefit the property for a longer period of time.
Kellie Mangino
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