The "demised premises?"

When a tenant leases space from a landlord, how do you know exactly what you are getting in terms of square footage? After all, you have worked so hard to get the rate you pay per square foot down, but what prevents a landlord from fudging the square footage used as the basis for determining your rent?

In fact you may have heard the stories of landlords in New York and other cities leasing space far greater than the actual premises. When skyscrapers came onto the scene at the turn of the last century, owners each seemed to have their own standard for square footage measurement, and, even more concerning, there was no one to verify the measurement. Most business owners didn’t pull out a tape and measure the space, and even if they do, the landlord has many tools and definitions at his disposal that are distinctly foreign to tenants.

I Pay for the Bathroom?

When a tenant leases space in an office building with more than one floor, then the landlord will split the square footage of common lobbies, corridors and restrooms pro rata based on square footage occupied by all the tenants in the building. So you do pay for more than the actual space you lease (called the “demised premises”). There are many more exciting terms such as “loss factor,” “useable square footage,” and “gross or leasable square footage.”

After much complaining about scenarios like the New York measurement follies, a number of owners’ associations popped up. In 1907, many of these groups combined to form the Building Owners and Managers Association (BOMA International). In North America, this association’s membership represents more than 9 billion square feet of space.

The “BOMA Standard” is widely recognized in the commercial real estate industry as the method to calculate the square footage under lease. It accounts for the common areas and for many other items such as “vertical penetrations” through the space.

As to verifying that the square footage meets the BOMA Standard, a registered architect can certify the measurement. It’s better if the architect is retained by the tenant, but, at a minimum, we have a standard and a professional who has an ethical obligation to verify the measurement. As Ronald Reagan famously said, “Trust, but verify.”

A New Approach

The last version of the BOMA standard was published in 1996. Building construction standards evolve and there is a need for a new standard to account for changes. In response, BOMA release a new standard with the catchy title Office Buildings: Standard Methods of Measurement and Calculating Rentable Area (2010). The new publication has several key enhancements that add step-by-step measurement guidelines, clarify gray areas, and make it more user–friendly via a new interactive downloadable format.

“This standard will serve as an indispensible tool in the marketplace for property managers, architects, contractors, appraisers and other parties who measure space,” remarked BOMA International Chair James A. Peck. “The updates we have made to the standard reflect the needs of users in the field. We have also brought the standard into the digital age by including hyperlinks to definitions and full color illustrations in the PDF document, eliminating ambiguity and making it easier than ever to understand.”

Later this year, BOMA will release two more standards: one for use in multi-residential buildings and one for retail spaces.

The moral to the story is to check with your broker or architect during the space search process to make sure that you are getting what you are paying for. Ask them to explain to you in simple terms how the landlord is calculating the square footage in the lease and make sure you agree. Maybe one day a tenant association will form and come up with their own version of measurement, but for now, we use BOMA; and it’s new and improved!

Source: BOMA

Ken Ashley