Failure to Enforce a Commerical Property Leases Contractual Provision May be a Waiver of that Right

Even if a lease provides that the landlord can charge for annual increase in the operating expenses, can a landlord start to make the company pay this annual increase after three years? A company signed a signed a five-year lease for some Central Phoenix office space and are currently three-years into that lease. The company has paid the same monthly rent for three years. Recently the landlord sent the company a bill for the monthly rent plus an additional charge for an increase over the previous year in the operating expenses for the office building. The company reviewed their commercial property lease, and the lease says that each year the landlord can bill the tenant for any increase in the operating expenses (such as insurance and repairs/maintenance) over the operating expenses for the previous year. When the company complained to the landlord about being billed for the increase in the additional operating expenses, the landlord said that the former bookkeeper simply failed to bill them each year for the increase in the operating expenses, and that they should be thankful they were not being billed retroactively for the increases in the operating expenses for all of the prior years. Has the landlord waived the right to collect for increased operating expenses because they waited three years to charge for them?

If the landlord’s former bookkeeper simply made a mistake in failing to bill for the increased operating expenses for three years, the landlord is entitled to bill you now for the increase in operating expenses over the previous year. In fact, the landlord is probably correct that the company could be billed for the increase in operating expenses for the prior years of the lease.

Note: In this gloomy commercial leasing climate, some landlords are happy just to get the base rent from commercial tenants, and intentionally do not require payment for increased operating expenses. This failure, with knowing forbearance by the landlord of the right to collect for increased operating expenses, may be a waiver of any claim by the landlord for those increased operating expenses.

Combs Law Group was organized as and continues to be a highly specialized, boutique real estate law firm. For more information please contact us at info@combslawgroup.com or by calling 602.957.9810.

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