Contributed By McGuireWoods LLP
Parties are generally free to negotiate variations in base rent as they see fit. However, under most commercial leases the base rent will increase at regular intervals over the course of the term, typically on an annual basis (ie, on each anniversary of the rent commencement date). However, these adjustments sometimes occur less frequently (eg, every three to five years, or at the time an extension option is exercised, etc).
In contrast, operating expenses and other “additional rents” are typically based on the landlord’s actual expenses incurred in a given year, so they typically do not vary on a regular schedule. Rather, tenants typically pay a fixed amount each month, based on the landlord’s estimated costs, and the parties make an annual adjustment once all final costs are known. However, in each new lease year the landlord may reserve the right to modify or increase its estimates, and thereby increase or modify the tenant’s monthly estimated contribution.