Classify All Monies Tenant Owes as ‘Additional Rent’

Commercial leases typically require tenants to pay not just base and percentage rent but other costs, such as electricity, taxes, CAM, security deposits, late fees, etc. Many of the standard lease forms we’ve seen treat these payments as being separate from rent. The problem with this approach is that the landlord may have to initiate a lawsuit if the tenant doesn’t pay the required charge. You can avoid these hassles and make enforcement and collection easier by defining costs not directly related to base and percentage rent as “additional rent.”

The “Additional Rent” Advantage

The “additional rent” strategy is especially advisable in the many states that have a streamlined legal process typically known as “summary proceedings” that commercial landlords can use to evict a tenant for nonpayment of rent. While rules vary by state, the process typically involves three basic steps: 

• The landlord serves the tenant with a petition and notice of petition;
• The court holds a hearing and makes a ruling; and
• If the landlord wins, the court issues a judgment for possession authorizing eviction.

Classifying lease payments as “additional rent” enables you to use the summary proceedings remedy against tenants that don’t make the required payment. Essentially, the failure to pay CAM, taxes, or other costs becomes the equivalent of failure to pay base or percentage rent for enforcement purposes. Without the “additional rent” clause, you’ll have to deal with the hassles of a regular lawsuit to collect the money the tenant owes you.  

Leasing Strategy

There are two basic strategies you can use to ensure that lease costs count as “additional rent,” according to attorneys: 

Option 1: Add a definition of “additional rent” to the miscellaneous section of the lease specifying that all money due to you from the tenant under the lease, other than base and percentage rent, is “additional rent.” 

Option 2: Separately insert a phrase indicating that a payment will constitute “additional rent” in each lease provision setting out the tenant’s obligation to pay the particular charge. 

A Washington, D.C., attorney prefers Option 1 because it’s simple and eliminates the risk of inadvertently omitting the “additional rent” language for a charge. 

It’s also advisable to state in the lease that, unless the parties agree otherwise, all the money the tenant owes you will be due within a set number of days—for example, 10—after the tenant gets your bill. In addition to ensuring a fast, simple collection process, this can help prevent disputes over when the tenant is obligated to pay a lease cost.  

Model Lease Language

For the purposes of this Lease, “Additional Rent” shall mean all sums, charges, or amounts of whatever nature, other than Annual Rent and [insert if applicable] Annual Percentage Rent to be paid by Tenant to Landlord in accordance with the provisions of this Lease including, without limitation, [add to or omit from the following based on your own agreement with the tenant] taxes, electricity, water, sprinkler, security deposits, late charges, security services, and fees and expenses incurred by Landlord as a result of instituting, prosecuting, or defending any action or proceeding, whether or not such sums, charges, or amounts are referred to as “Additional Rent” and, except as otherwise provided herein, are due [insert #, e.g., 10] days after Tenant’s receipt of an invoice therefor. Landlord shall have the same remedies for default in the payment of Additional Rent as for default in the payment of Base Rent.