Examples of rental area regulations

Conducting for a few years trainings on residential and commercial space measurement norms (offices, retail, warehouses) – I still receive questions concerning rental area regulations specifically referring to ways of measuring of rental areas. Besides, as an surveyor with 10-year-experience I have consulted lots of lease agreement drafts with regard to area measurement norms. I have come to one important conclusion – property managers like inadvertently end up having more work necessary, which often results in arguments with tenants. There are no lease agreements drafts commonly available due to the fact that it is usually confidential  information. This is why I have decided  to write the following article, to give examples of rental area regulations, add-on factor of building area (R/O Ratio) and add-on factor of floor area (R/U Ratio). I advise you to use them in order to avoid conflict with tenants and in order not to generate additional work. 

Add-on factor – always fixed and arbitrary

The most frequent mistake in lease agreements is recording add-on factor as a variable. This ad-on factor should always be fixed value variable, recorded in % or m2 which is independent of other tenants’ arrangement. Why should it be like that? In a case in which add-on factor is recognized as a variable (resulting from current arrangement of partition walls  between tenant area and common area) and a certain floor common area (e.g utility room) will become part of tenant area, thane floor area add-on factor will decrease. Similar situation may take place in case of building area add-on factor. For example, common area serves  whole building. Tenant who includes such a common area for his exclusive lease, makes building area add-on factor decrease.

What to do if you change a variable of common area?

In the situation in which  floor or building areas add-on factor decreases, and lease agreement records that common area is counted according to variable add-on factor (resulting from current geodetic measurements) – then you should annex lease agreement which tenants who are affected by this change.  Finally, tenant’s gross area changes. This such situation requires property managers to supervise necessary changes in lease agreements. From my own experience I know a lot of situations, when tenants won disputes and they got refund for areas, which ceased to be common, and for which they had paid.

Example of a regulation: “Common area add-on factor is a fixed value variable, independent of other tenants arrangement and equals 5%”.

For your information, common area add-on factor is understood as a total of floor and building common areas. You can get more information of how to count it on blog geodezyjny.com in an article “Everything about common area add-on factor – add-on fctor, Load factor, R/U ratio, R/O ratio-“

More than one floor add-on factor – is it possible?

Obviously, it is possible, but very often it is disregarded when it comes to charging fees for rent and in lease agreement. It often results in tenants’ rent claims. Imagine a situation in with elevator shaft is located in central part and form hall in front of the elevator there are to exits leading in two opposite directions. There is a limited entry to side separate corridors (e.g: chip cards). Assuming that on one site there are three tenants, and on the other site there are for tenants, then both groups have a different floor add-on factor. Both groups use a common hall, but remaining corridors are for exclusive use of particular groups. In this way a corridor, which is used by four tenants cannot be included into a common area of reaming three tenants (and reversly).  As a result floor add-on factor is different for all tenants than it would be in a case of following just one add-on factor.In a case in which there is inly one tenant on a floor, the rental rea of this tenant will be the same as a total of single tenants together with their floor add-on factor.

How many add-on factor should included lease agreement

I used to come across in lease agreements two factors: a separate floor add-on factor and a separate building add-on factor. In a case in which in agreement there is a regulation, that they are variable values, it results in double necessity  to amend regulation in lease agreement. It seldom happens, that at the same time a certain floor area and a building area change a functionality. All changes in lease agreements cause tenants anger and it is advisable to avoid such situations. The easiest way, would be to include in lease agreement one common area add-on factor (two values multiplied) and not divide it into floor and building add-on factors.

New trend – comprehensive add-factor

A recently observed trend is the use of the third add-on factor by the investors and property managers, connected with property around a building.  Income from this source should cover costs of maintaining plot of land on which a complex of buildings – for example offices and services – is located. It is a huge cost for tenants, because amount with  service charge in case on this add-on factor is usually additional 20 PLN per m2.

Floor plans as an integral part of the agreement

Curiosity of tenants about what they pay for is an indispensable thing. This is why it is important to mark the lease area on floor plans and attach it to the lease agreement as an integral part of it. In such a graphical attachment it is useful to separate both types of surfaces (for exclusive use by the tenant and for common use). I suggest in such drawings to add information about the area in m².

Graphics are not always consistent with the content of the contract

Outrageous, but unfortunately frequently happening, is inclusion of inconsistent or even contradictory regulations in the lease agreement. For example, the contracts often show that the rental area is calculated according to the BOMA Office standard. And in graphical attachments either there is no information what standard has been used to make the plan or there is information that the elaboration has been made according to PN-ISO 9836: 1997 standard. These are two different standards and they can’t be mixed at all – or at least not in this way! Entries on graphics which are graphical attachments must be prepared according to the same standard as the lease agreement.

Modifications of standards in lease agreements

Yes – modifications of area measurement standards can be used. This is a great surprise for almost every listener during my trainings. All records about modifications of the standard should be the same as in the graphical attachment to the lease agreement. For example, I will provide some modifications which we applied in many office buildings upon reguest of building owners:

• In the the Tegova standard technical areas are included in building common areas (Tegova doesn’t have information about building add-on factor and floor add-on factor).

• In the PN-ISO 9836:1997 partition walls are included in the rental area

• In the PN-ISO-PN-ISO 9836:1997 instead of the walls, the surfaces are measured for the windows (curtain elevations)

• In the BOMA standard shaft areas above 1m² are included in the rental area (not included in the standard BOMA)I will tell you a secret. The common knowledge on the market is that the BOMA standard gives the largest rental space. And it is true but only in case when we don’t introduce modifications in other standards. However, with only three modifications, the larger area will be obtained with the Tegova standard than BOMA standard without modifications. And from the PN-ISO 9836:1997 standard it is easy through modifications to come to the BOMA standard.

How to modify PN-ISO9836: 1997? – play on words.

All entries in lease agreements and graphical attachments are a play on words. It is a game in which many managers and lawyers fail because they mix up definitions used in the areas measurement standards. In the market, there are 14 area measurement standards (plus their varieties). Each of them has its definitions and a common mistake is to mix them up. In everyday speech it doesn’t cause major problems, but in the lease agreement it does. How to avoid such problems? I will give you examples based on PN-ISO9836: 1997 standard, which is usually used to measure buildings for taxes. Therefore, the standard can be used for lease purposes – it is not necessary to perform measurements according to another standard of surface measurement. In the PN-ISO9836:1997 standard, it shouldn’t say that the rental area corresponds to the usable area – this is the biggest mistake! In addition to the usable floor area in the PN-ISO 9836:1997 Standard there is also the hallway area, the technical area and the constructional structure area. The latter includes, among others, partition walls. If there is a regulation that the area is calculated according to the PN-ISO9836:1997 Standard and the term usable floor area is used than we can’t include the partition walls, hallway areas or technical rooms serving the tenant only in the rental area. This is a common mistake. How to modify the PN-ISO9836: 1997 Standard to get larger areas? Just enter in the lease agreement and graphical appendices that this is PN-ISO / 9836: 1997 with modifications and clearly show which surfaces additionally are included in the rental area.

Example: “The lease area corresponds to the usable area together with the corridor area ​​ inside the tenant and the service area (technical) serving the needs of the tenant only. The lease area includes surfaces under partition walls together with the windows niches areas (measured on the level of the floor to the wall) together with the areas of niches in supporting walls. The area under the supporting walls is not included in the rent area, while the area of ​​the door crossing in supporting walls is included in the rent area. Rental space is not subject to reduction because of the height of the room.” And so we have a few additional % for the usable area in the PN-ISO 9836: 1997 Standard.

Don’t always “pump” the surfaces

Please note that not to every building and to every situation the above example can be applied. It all depends on the nature of the facility, the city in which the building is located and current trends in the rental market. In one building, for example: I introduced modifications to PN-ISO 9836: 1997, where partition walls are included in the lease area, but not all. The partition walls which were excluded were those which, with possible redevelopment of tenants, wouldn’t change or be liquidated, for example: partition walls at bathrooms and corridors. All such exceptions must be described in the lease agreement and on the graphic floor planes. The above is just an example and it is worth considering together with the owner / manager what to count and what not to include in the rental area. This is not so much about the “pumping” of the rental area, but the “immunity” of areas measurement and development for repairs and interior design changes. Do you want to know what modifications to introduce to other standards? I invite you to get in touch with me or to take a part in the training about the area measurement standards. Current schedule is available on http://uslugi.geodezyjny.com/szkolenia/.

Copying the article or its parts without the author’s permission is forbidden.

Author: Adrian Hołub

Translation: Monika Hołub

Contact with us

 Monika Hołub

Co-owner Polish Geodetic Group

szkolenia@geodezyjny.com

Tel.: +48 785 041 07

 Adrian Hołub

Co-owner Polish Geodetic Group

adrian.holub@geodezyjny.com

Tel.: +48 608 577 042

Measure it soon!