Size of Leased or Purchased Space: How Much Is There?
A Look at Leasing and Contracts
In an industrial or office lease or purchase negotiation, we often start with the amount of space as represented by the landlord or seller. However, as your broker co-author has learned (the hard way), the square footage of space represented may not be what square footage is actually there. Accordingly, it is incumbent upon us as experts to follow these simple practices to ensure our clients are leasing or buying the actual square footage intended.
1. Reserve the right of the tenant or buyer to confirm or remeasure the space. Often the landlord or seller will not possess a current, certified architectural floor plan or space plan confirming the actual existing square footage. Reserve the right in the lease or contract to engage an architect or space planner for this purpose. Such costs are typically de minimis and could be shared by the parties to the transaction.
2. Determine applicable measuring standards. BOMA, the AIA, and other organizations have modified their space measurement standards in recent years. Arguably, depending on which standards are applied, the amount of existing square footage can vary as much as 3-10%. Therefore, the parties to the transaction must agree on the standard applied to normalize the space measurement process as much as possible.
3. Determine the appropriate time and party to take and confirm space measurements. The final determination of existing actual space must be taken at a time when—in case the building is occupied prior to lease or sale—it is easiest and most expeditious to do so to ensure accuracy. Space measurements must also be performed by a qualified and mutually agreed upon third-party, be it an architect, space planner, or other professional.
4. Beware of differing measurement conventions for international transactions. As broker experts in an international professional association, we may be faced with different space measurement conventions as well as units of measurement when doing cross-border work. Be sure to align yourself and your client with those local professionals who have the most experience and knowledge to assure the parties that final space measurements are confirmed and mutually agreed upon.
5. One alternative to remeasuring the space would be stipulating to the final existing space calculation. Rather than engaging in a battle between space planners or architects, the parties could mutually agree that there are different ways of measuring space and agree to the amount of existing square footage for the property or leased premises. This method saves extra costs, potential delays in closing, and provides mutual agreement to an important measurement that will determine final total occupancy costs of the space to the tenant or buyer.
While no method is perfect or recommended over others, the bottom line is this: the parties should agree that the space represented is the ACTUAL space leased or sold.
By: James Hochman, David Liebman
