Common Area Charges

Include income collected from tenants for operating and maintaining items pertaining to common areas. Shopping center leases usually contain a clause requiring the tenant to pay its share of operation and maintenance on common areas and defining the basis on which charges are made and the type of cost items allocable to maintenance of the common area. Of the ways to prorate the charges among tenants, the most common are (1) a prorated charge based on a tenant's leased area as a portion of the total leasable area of the center or the linear exposure in store frontage, (ii) a fixed charge for a stated period, and (iii) a variable charge based on a percentage of sales. Some centers include a cost-of-living increase in the common area charges.