[RPPTL LandTen] Question on Capital Expenses

Fri Sep 16 08:14:30 PDT 2016

Scott, I agree with you. If the definition of “operating expenses” is broad enough and the lists of “inclusions” or “exclusions” do not expressly limit cap ex pass throughs then I think it’s fair game.

Neil

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Neil B. Shoter
Partner

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From: landten-bounces at lists.flabarrpptl.org [mailto:landten-bounces at lists.flabarrpptl.org] On Behalf Of Scott Frank
Sent: Friday, September 16, 2016 8:24 AM
To: RPPTL Landlord Tenant Committee
Subject: Re: [RPPTL LandTen] Question on Capital Expenses

Thanks for the answers so far. Please note that this is not a lease drafting question. My standard lease forms already account for this.

I am just debating with my client over an existing lease at a property they are buying. My position is that if its not excluded its included (although gaap seems to indicate that the costs need to be amortized over useful life), but they insist that the capital expenses are excluded if they are not explicitly included. So I wanted to get your take to see how far off I am.

Thanks.

Sent from my iPhone

On Sep 16, 2016, at 8:12 AM, David Weisman <David.Weisman at gmlaw.com<mailto:David.Weisman at gmlaw.com>> wrote:
I have often seen CAM including the annual expense of the capital improvement amortized over its useful life based upon a straight line depreciation schedule.

Another concept is to exclude them, except for amortized portion of capital improvements installed for the purpose of reducing or controlling Operating Expenses or complying with applicable Laws.

David  Weisman
Board Certified Real Estate Lawyer
Greenspoon Marder, P.A.
200 E. Broward Blvd., Suite 1800
Fort Lauderdale, FL 33301
Phone 954-491-1120 Ext. 1015
Direct Phone 954-343-6941

David.Weisman at gmlaw.com<mailto:David.Weisman at gmlaw.com>
www.GMlaw.com<http://www.gmlaw.com/>

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From: landten-bounces at lists.flabarrpptl.org<mailto:landten-bounces at lists.flabarrpptl.org> [mailto:landten-bounces at lists.flabarrpptl.org] On Behalf Of Law Offices of Scott A. Frank P.A
Sent: Thursday, September 15, 2016 11:03 PM
To: 'RPPTL Landlord Tenant Committee'
Subject: [RPPTL LandTen] Question on Capital Expenses

All:

I am presently having a debate with a  client regarding capital repairs/replacements/improvements in a NNN lease for an office building.  The lease lists CAM components, with standard “includes but is not limited to . . .”.  But the list neither includes nor excludes capital expenses explicitly.

So do you think the Landlord can pass these expenses through?  And does your opinion differ if the expense relates to a capital replacement/repair versus a capital improvement?

As always, thank you for your input.

Scott A. Frank
Attorney at Law

LAW OFFICES OF SCOTT A. FRANK, P.A.
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Boca Raton, FL 33487
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