Which statement is correct regarding rent components?

Which statement is correct regarding rent components?

• A. The base rent is the fixed payment; additional rent covers pass-through costs.
• B. The base rent is variable with occupancy; additional rent is fixed.
• C. The base rent is the fixed payment; additional rent covers pass-through costs.
• D. The base rent includes CAM and taxes automatically.

Answer: (C)

Rent in many commercial leases is made up of two parts: a fixed base rent and a variable additional rent. The base rent is the fixed amount due each period, serving as the landlord’s predictable revenue. The additional rent covers pass-through costs—the operating expenses the landlord incurs, such as CAM (common area maintenance), property taxes, insurance, maintenance, and sometimes utilities—which are allocated to tenants based on their share of the space. Because of that, statements that the base rent is fixed and that pass-through costs drive the additional rent are correct. The base rent does not automatically include CAM and taxes; those items are billed separately as part of the additional rent.

Rent in many commercial leases is made up of two parts: a fixed base rent and a variable additional rent. The base rent is the fixed amount due each period, serving as the landlord’s predictable revenue. The additional rent covers pass-through costs—the operating expenses the landlord incurs, such as CAM (common area maintenance), property taxes, insurance, maintenance, and sometimes utilities—which are allocated to tenants based on their share of the space. Because of that, statements that the base rent is fixed and that pass-through costs drive the additional rent are correct. The base rent does not automatically include CAM and taxes; those items are billed separately as part of the additional rent.