Commerical Condo Lease - Capital Reserve Fund = Operating Expense?
Lease existed before building went condo and provides for annual Operating Expense adjustment but specifically excludes from the otherwise broad definition of Operating Expenses "the cost of capital investment items."  Building is now condo and the association assesses Owners a separate assessment for Capital Reserve Fund.  Owner/Landlord attempts to pass it on to Tenant via monthly rent statement as a line item separate from Operating Expense.  Current lease is simply adoption of original lease with all terms "identical."

Tenant says they won't pay for "Capital Reserve Fund" because it is equivalent to a "capital investment."  Owner says, as an assessment, its an Operating Expense and Tenant must pay.

Who is correct?
[{"id": "gor65ju", "text": "Do HOA by-laws govern the Capital Reserve Fund separately from the HOA's general funds?\n\nI would lean towards tenant is not responsible for the HOA's capital reserves but if those reserves are used to pay operating expenses that the tenant would normally owe under the lease, then the tenant has to reimburse a pro-rated portion of that expense to the landlord.", "replies": [], "depth": 1}, {"id": "gotsg0f", "text": "really interesting question, was there a change in ownership of the unit when the building went condo?", "replies": [{"id": "gou3s37", "text": "Yes.  Pre-conversion, the entire high rise building was 100% owned by a single entity.  About 10-15  years ago, the then building owner decided to go condo, offering individual units for sale to the general public.  Many were purchased by the then current tenant (medical, law, general office) and many were purchased by investors who  rented to either then current tenants or new tenants.  In this specific case, the unit was purchased by an investor who entered into a \"new\" lease with the the then current tenant that was simply a one-pager adopting the prior (pre-conversion) lease with new rent schedule.  Hence, the awkardness of applying pre-condo lease provisions to post-condo reality.", "replies": [{"id": "goupoyr", "text": "&gt;d before building went condo and provides for annual Operating Expense adjustment but specifically excludes from the otherwise broad definition of Operating Expenses \"the cost of capital investment items.\"  Building is now condo and the association assesses Owners a separate assessment for Capital Reserve Fund.  Owner/Landlord attempts to pass it on to Tenant via monthly rent statement as a line item separate from Operating Expense.  Current lease is simply adoption of original lease with all terms \"identical.\"\n\n(not an attorney, plus this is some stranger on the internet) If I was the investor I'd have someone review the existing lease, especially the rest of the language around expense recoveries, common area definitions, etc. It's worthwhile at this point to triple check the current and last years calculation from scratch - you may find an error in either direction. Since the \"old\" lease was either used as a template or extended with some changes in terms you'll want to look carefully at base-year amounts. \n\nIf the calculations are correct and the answer from the experts is a shade of grey I'd have to consider the impact of not collecting this amount on the investment to see how much I want to invest in forcing the issue.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gp28s53", "text": "Assuming what you described is reflected in the actual documents, I would concur that the tenant is not obligated to pay for the \"Capital Reserve Fund\" and only for the operating expenses. The building owner will be obligated to pay the Capital Reserve Fund out of their own pocket which is just like putting money aside for items that a Landlord usually ends up paying for anyway such as roof replacements, elevator replacements, and similar items.", "replies": [], "depth": 1}]