How do I resolve an area dispute?
Disputes about rentable/leasable areas may arise between a landlord and tenant for various reasons. A landlord may use outdated, historical data in their leasing figures and may not rely on formal measurements or associated documentation at all. When a landlord is not able to provide a tenant with professional, third-party documentation, such as floor plans, area certification letters and area analysis charts; a tenant may become suspicious of the stated area which they pay rent on. If this occurs, a tenant may attempt to measure the space themselves or hire an independent measurement firm to produce documentation as evidence that the landlord is not accurately reporting areas.
In some cases, the tenant may simply become suspicious because they do not understand how usable and rentable areas are calculated. The tenant may not consider that usable area is normally measured to the center of demising walls and to the interior dominant surface of outer building walls (usually the glazing). Furthermore, the tenant may not consider that their rentable area is based on a proportionate share of common area on their floor and in the building. When up-to-date documentation is provided and the methodology of measurement is properly explained, the tenant will usually back away from the dispute. If reliable documentation is not provided, it is not uncommon for a tenant to continue their pursuit in an effort to lower their leasing costs, and in some cases sue the landlord retroactively.
It is a significant liability to a landlord if they have not developed a legally binding lease document with a clearly stated measurement methodology and if they do not outsource accurate, certifiable building measurements by a reputable measurement company. Furthermore, tenants are becoming more sophisticated in their understanding of rentable area calculations, so it is critical that landlords have their buildings measured by a professional measurement company as part of their regular due diligence, so that the stated areas presented in a lease document are verified and indisputable.
A landlord with a thorough and recurrent due diligence program will prevent most disputes from arising in the first place, but if a dispute about usable or rentable area should persist, an unbiased professional measurement company is usually hired to physically measure the disputed area and report the actual area. If the results are not accepted by any one party, an additional measurement by another measurement firm is usually necessary.
The BOMA standards do provide some guidelines with regards to disputes. The BOMA standards 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 the BOMA Standards, it has become the differential generally accepted by the industry.
If you are involved in an area dispute of any kind, Extreme Measures can help. We strongly believe that most disputes can be resolved before costly lawsuits are initiated.