Client
Fortune 100 telecommunications company that leased a portion of a newly constructed building in Boston, Massachusetts.

Audit Discovery

The lease provided for a Base Amount (Expense Stop) over which expense increases were to be measured. The Expense Stop was stated in the lease as $500,000. The building’s expenses for the first lease year were approximately $800,000, a 60% increase over the Expense Stop.  The current year expenses appeared reasonable; therefore the focus of the audit was why the Expense Stop was so low. After detailed research, it was discovered that the Landlord had represented to the tenant that it would cost $5.00 per square foot to run the building. Originally, the building was to be 100,000 square feet, thus the Stop would be $500,000. After the first draft of the lease agreement was circulated for attorney review, the Landlord increased the size of the building to 150,000 square feet. For a building of this size, the Stop should have been $750,000 ($5.00 x 150,000 sf.); however, due to an oversight, the original draft of the lease was never changed.

Resolution
KBA negotiated to increase the Expense Stop to $750,000, thus saving the tenant $250,000 over the life of the lease.  

Lessons Learned
(1) When negotiating a lease, be very careful to check all of the financial terms at the end of the negotiation process to ensure that changes that may have occurred during the negotiation process do not require changes in the lease terms.  (2) Despite the express language in the final executed lease document, in certain cases, recovery of payments that are inconsistent with the original lease deal is possible.