Operating Cost Statements – How Much Information Is Enough?

Operating Costs – they are discussed endlessly during the lease negotiations and then often become the most contentious ongoing issue between landlord and tenant.

The almost universal practice is that at the beginning of each year landlord estimates operating costs and tenant pays in instalments based on that estimate. Shortly after the end of the year the landlord delivers a statement of operating costs for the past year which may be certified or audited depending on the provisions of the lease. Tenant is given a period of time to challenge the statement after which it is deemed to be final and forms the basis of an adjustment between landlord and tenant reflecting the difference between estimated and actual operating costs.