Confusion often arises with terminology used to describe areas. Rent is usually calculated based on area. An offer to lease may refer to “Useable Area” or “Leasable Area” and rent will likely be calculated based upon “Rentable Area” or “Gross Leasable Area.”
Typically, Useable Area is the amount of space a tenant actually occupies within its premises (with or without exclusions for areas such as structural columns, recess entry, exit doors). Rentable Area, however, can factor in other areas including a share of the common areas (often referred to as a “Gross-up Factor”) within the building such as lobbies, stairwells, elevators, rest rooms and janitor closets.
These additional areas together with the Useable Area can significantly increase the amount of rent payable. Gross-up Factors can be significant and result in an increase in the Useable Area by ten percent (10%) or more.
Area calculations should be reviewed before finalizing any offer to lease, particularly where the offer provides not only that areas will be calculated in accordance with the landlord’s standard form of lease but also that the tenant is required to sign the landlord’s standard form of lease.
