Question: Three years ago we signed a five-year lease for our Central Phoenix office space. We have paid the same monthly rent for three years. This month the landlord sent us a bill for the monthly rent plus an additional charge for an increase over the previous year in the operating expenses for the office building. I reviewed our commercial property lease, and the lease says that each year the landlord can bill the tenant for any increase in the operating expenses (such as insurance and repairs/maintenance) over the operating expenses for the previous year. When I complained to the landlord about being billed for the increase in the additional operating expenses, the landlord said that the former bookkeeper simply failed to bill us each year for the increase in the operating expenses, and that we should be thankful that we were not being billed retroactively for the increases in the operating expenses for all of the prior years. Even though the lease provides that the landlord can charge us for the annual increase in the operating expenses, can the landlord after three years start to make us pay this annual increase? In other words, has the landlord waived the right to collect for increased operating expenses?
Answer: If the landlord’s former bookkeeper simply made a mistake in failing to bill for three years for the increased operating expenses, the landlord is entitled to bill you now for the increase in operating expenses over the previous year. In fact, the landlord is probably correct that you could be billed now for the increase in operating expenses for the prior years of the lease.
Note: In this gloomy commercial leasing climate, some landlords are happy just to get the base rent from commercial tenants, and intentionally do not require payment for increased operating expenses. This failure, with knowing forbearance by the landlord of the right to collect for increased operating expenses, may be a waiver of any claim by the landlord for those increased operating expenses.