USA – NEW JERSEY Law and Practice Contributed by: David Freylikhman, Cory Mitchell Gray, David Jensen and Jody Saltzman, Greenberg Traurig LLP
responsible for constructing improvements and maintaining the property. 6.3 Regulation of Rents or Lease Terms New Jersey does not regulate commercial rents. 6.4 Typical Terms of a Lease Leases typically range from five years to 15 years and will often afford the tenant at least one option to renew. The terms vary based on each deal; however, the rent during the renewal term is often based on: • a fixed percentage increase over the rent previously in effect; • the then-fair market value of the premises; or • consumer price index adjustments. In addition, it may be the greater of one of the foregoing determinations (ie, the greater of the fixed rent increases and fair market value). Ground leases have much longer terms, typical - ly 25 years or more, and landlords and tenants generally file a Memorandum of Lease on the public records. For space leases, the tenant has all repair and maintenance obligations within the premises; the landlord is generally responsible for main - taining the structural components of the build - ing, the roof, common areas and the building systems (unless repairs are a result of the ten - ant’s careless acts or omissions). Typically, leases provide that, if the tenant fails to make its required repairs in a timely manner and fol - lowing notice and opportunity to cure, the land - lord has the right to make such repairs and then charge back the incurred costs to the tenant. In a ground lease, it is common for the tenant to be solely responsible for all maintenance, repairs and replacements.
Rent is typically paid monthly, although ground lease payments may also be made quarterly or annually. 6.5 Rent Variation Typically, base rent will increase at certain trigger points that are negotiated as part of the eco - nomics of the lease deal (such increase could be every three years, five years or another inter - val). The amount of the increase varies but is usually a predetermined percentage. Escalation charges are usually computed annually, with estimated payments until actual expenses are known and reconciled. In a retail context, the tenant will often be required to pay the landlord “percentage rent” on the tenant’s gross sales receipts with a computation commonly done on an annual basis and with payments to be made on an estimated basis until actual sales figures are available. 6.6 Determination of New Rent The amount of the increase is usually known at the time of lease execution and is determined by either a fixed dollar amount, a figure based on cost per square foot, or another fair market valuation calculation or formulation such as the Consumer Price Index. 6.7 Payment of VAT No VAT is payable in New Jersey. 6.8 Costs Payable by a Tenant at the Start of a Lease Other than rent payments, diligence costs, legal fees and costs associated with posting a security deposit, the tenant may incur costs associated with obtaining permits for its intended use and any construction or fit-out costs associated with constructing or remodelling the premises. Typi - cally, with a gross lease, the landlord will provide the tenant with a broom-swept empty space in
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