USA – NEW YORK Law and Practice Contributed by: Lindsey Haubenreich, Joseph Heins, Timothy Moriarty, Kimberly Nason and Matthew Fitzgerald, Phillips Lytle LLP
6.5 Rent Variation Rent typically increases either annually or once every three or five years, usually by a predetermined amount,
Gross Leases The landlord provides services and pays the operat - ing expenses for the property, and such expenses are typically factored into the tenant’s rent. In addition, the tenant typically pays escalation charges with regard to real property taxes and operating expenses. In Class A office buildings, the tenant typically pays its propor - tionate share of taxes and operating expenses over the negotiated base year, but the customary practices vary by location. In retail leases, the tenant typically pays its propor - tionate share of such taxes and expenses from the first dollar. Ground Leases The landlord leases the land to the tenant. The tenant pays ground rent, covers all costs and expenses, and owns and is responsible for all improvements to the premises. Upon the expiration of the lease, posses - sion of the land and ownership of any improvements revert to the landlord. 6.3 Regulation of Rents or Lease Terms There is no commercial rent regulation in New York State. The terms of commercial leases are a matter of negotiation between the parties, subject to case law and statutes pertaining to specific issues. For exam - ple, statutes provide that a lease cannot contain a waiver of a landlord’s responsibility for its negligence. 6.4 Typical Terms of a Lease The term of a typical commercial lease is five to 15 years, but the term of a typical ground lease is 30 to 100 years. It should be noted that New York State and City transfer taxes may be due on any lease with a term of more than 49 years, and under other cir - cumstances. The tenant is typically responsible for maintaining and repairing the space it occupies, whereas a landlord is typically responsible for repairing and maintaining the common areas, the structure, the exterior of the building and surrounding property. Rent payments are typically made on a monthly basis, although rent may be paid annually or quarterly in a ground lease.
depending on the terms of the lease. 6.6 Determination of New Rent
Increases in rent under a commercial lease are typi - cally determined by negotiation prior to entering into a lease. Increases can be expressed in terms of a fixed dollar amount, a per-square-foot amount, a percent - age increase or a formula based on, for example, the Consumer Price Index or fair market rental value. 6.7 Payment of VAT Value-added tax, or other taxes or governmental lev - ies, are typically not payable on New York rent. An exception is the New York City Commercial Rent Tax (CRT) that is imposed on the rent paid by tenants of commercial property located south of the centreline of 96th Street in Manhattan. 6.8 Costs Payable by a Tenant at the Start of a Lease A tenant may be responsible for all or a portion of the cost to build out its leased premises to the specifica - tions required for its operation. Landlords and ten - ants will negotiate the condition in which the landlord must deliver the space to the tenant, which can range from as-is to “white box” to turnkey. Landlords are responsible for all costs associated with bringing the premises to the required condition, and tenants per - form and pay for all additional work necessary for its use. Landlords will often also agree to pay a tenant improvement allowance, which the tenant can use to offset the costs of its work. Alternatively, the landlord may be responsible for building out the space to meet the tenant’s needs. This is known as a “turnkey” lease and may include a cap on the landlord’s construction costs, with the tenant being responsible for excess costs. 6.9 Payment of Maintenance and Repair Landlords are typically responsible for paying for the maintenance and repair of common areas used by several tenants, such as lobbies, elevators, parking lots and gardens. However, tenants are often respon - sible for reimbursing the landlord for their pro rata
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