Expense Recoveries

Expense recoveries, also known as pass-throughs or reimbursements, are amounts paid by tenants to landlords to cover a portion or all of the property's operating expenses. The type and extent of expense recoveries depend on the lease structure and the terms negotiated between the landlord and the tenant.

Common types of expense recoveries include:

Triple Net (NNN) Lease: In a triple net lease, the tenant is responsible for paying their share of property taxes, insurance, and common area maintenance (CAM) expenses, in addition to their base rent. This type of lease shifts most of the property's operating expenses to the tenant, providing the landlord with more predictable net income.

Modified Gross Lease: In a modified gross lease, the tenant pays a portion of some or all of the property's operating expenses, such as property taxes, insurance, and/or CAM, as negotiated in the lease agreement. The landlord typically covers the remaining expenses.

Full-Service Gross Lease: In a full-service gross lease, the landlord covers all of the property's operating expenses, and the tenant pays a higher base rent to account for these costs. This type of lease provides tenants with more predictable rental expenses, as they are not directly responsible for fluctuations in property operating costs.

Expense recoveries help landlords offset the costs of operating and maintaining a property while ensuring that tenants contribute their fair share of these expenses. Properly managing and tracking expense recoveries is important for maintaining the financial performance and value of a property.