Don’t Forget Beneficial Transportation in Operating Expenses

If you’re the owner of a large retail property or several properties, you might decide to capitalize on the convenience factor and provide transportation for shoppers. While maximizing sales benefits you in the form of higher percentage rent and maintaining co-tenancy obligations by ensuring that tenants stay in business, remember that it also is a plus to those businesses. Make sure that in the lease you include any costs related to the transportation services in the list of costs that you can pass through as operating expenses or CAM costs.

In addition to convenience, there are also circumstances—depending upon your location—where you may be required to participate in mandatory transportation programs offered by your local or state government. You’ll probably be expected to absorb a portion of the costs involved with offering the service to the public.

Regardless of what your reason is for offering the services, your tenants should share the costs. To pass through these costs, include the following lease language in your list of operating expenses or CAM costs:

Model Lease Language

All costs associated with any transportation service or mass transit or carpooling program provided by Landlord, whether such service or program is voluntarily established by Landlord or required by government or quasi-governmental authorities.

The tenant shouldn’t object to this inclusion. But be aware that it may want to clarify in the lease that big-ticket items, like the actual cost of the vehicles, will be excluded as capital costs. Also, as with garage and parking lot cost pass-throughs, the tenant might want you to deduct any fee charged for the transportation service from the costs you pass through.