Get Flexibility to Allocate Garbage Removal Charges Among Tenants

If your lease is like many we've seen, it probably specifies a method for allocating garbage removal charges among your tenants—for example, on a per-square-foot basis. But being tied to one allocation method could cause problems for you with tenants or if you decide to sell your building or center. For instance, if a tenant believes that it generates less garbage per square foot than other tenants do, it may decide it's paying more than its fair share and start a major dispute. Or a prospective buyer might not like being stuck with a per-square-foot allocation if it uses another method at its other properties. Plus being tied to one method means you can't change it if you find a better way of allocating garbage removal charges.

Avoid Problems by Not Specifying Method in Lease

You can avoid these problems by not specifying a method of allocating garbage removal charges in the lease, says New Jersey attorney Marc L. Ripp. Instead, give yourself the flexibility to choose among various methods as you see fit, he says. Your chosen method doesn't have to correlate to the amount of garbage that the tenant actually generates, he adds.

Also make sure you categorize the garbage removal charges as “additional rent,” says Ripp. This way, if the tenant doesn't pay those charges, they'll be treated as a nonpayment of rent, triggering a lease violation, he explains.

Ripp suggests using the following lease language in your lease's CAM costs or operating expenses clause to make the tenant responsible for garbage removal charges that you allocate by whatever method you choose.

Model Lease Language

Landlord, at its sole option, may charge Tenant, from time to time, and Tenant shall pay Landlord upon demand, as Additional Rent, the cost established by Landlord for treating, handling, processing, collecting, and/or removing garbage, refuse, trash, or other waste (collectively, “Garbage”) relating in any way to the operation of the [Building/Center] and/or any of the tenants therein. Tenant shall pay said amounts, as determined by Landlord, even if the amounts do not correlate to the volume, scope, or size of actual Garbage generated by Tenant, its customers, visitors, invitees, licensees, guests, suppliers, vendors, materialmen, contractors, employees, or agents.

Compromise with Strong Tenant

A strong tenant may balk at your total control when picking an allocation method for garbage removal charges. As a compromise, you may have to agree to be fair and reasonable in your method, says Ripp.

Practical Pointer: If the tenant insists that you allocate garbage removal charges based on the actual amount of garbage each tenant generates, don't agree, says Ripp. That would require you to hire a sanitation consultant or install a keycard system to measure the amount of garbage from each tenant. That can be very costly, he warns.

CLLI Source

Marc L. Ripp, Esq.: General Counsel, The Gale Company, 200 Campus Dr., Ste. 200, Florham Park, NJ 07932; marc.ripp@thegalecompany.com.