Regular Business Hours

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“Regular Business Hours” is a term used in full-service gross (primarily office) leases and refer to the days and times that a property is open/accessible to the public and during which building services are provided at maximum levels. They are based on and consistent with how and when most office users/businesses operate. In most commercial leases, regular business hours are 8:00am-6:00pm, Monday through Friday, and 9:00am-1:00pm on Saturdays with federally recognized holidays exempted. Office tenants still have access to the property 24 hours a day, 7 days a week, 365 days out of the year; however, some building services may be unavailable or reduced to minimum levels outside regular business hours in order to reduce expenses. Examples of services that may be unavailable at such times can include but are not limited to property management, mail service, access to fitness or conferencing facilities, etc. Elevator service will always be available but may be reduced to one lift during off-hours.

Regular business hours are generally not subject to negotiation, particularly in multi-tenant office buildings where provisions that govern management of the entire property require consistency. For tenants that consistently operate outside regular business hours, there may be the option to have the leased premises separately submetered; however, this may be inefficient, ineffective, or prohibitive from a cost standpoint. Full-building tenants might request changes/extensions to the building’s regular business hours based on their hours of operation; however, this must be done during the proposal/letter of intent stage of negotiations because of the potential impact on operating expenses. Any resulting increase or decrease would need to be factored into the other economic terms of the deal. For the landlord this means increasing the base rent, lowering the amount of rental abatement (if any), and/or lowering the improvement allowance (if any). For tenants it means extracting additional economic concessions equivalent to the landlord’s savings.

The primary purpose of regular business hours is to provide the landlord with a framework to accurately estimate operating expenses and thus their projected rate of return. The primary building service affected by regular business hours is HVAC (heating, ventilation, and air conditioning). Lease language may vary, but landlords are required to maintain comfortable temperature levels during regular business hours (comparable to other office buildings) as part of a tenant’s right to quiet enjoyment. Utilities such as electricity and water are always fully available, but heating and cooling levels are modified during off-hours to lower energy consumption. Landlords do not turn off the heat in the winter or air conditioning in the summer outside regular business hours, but rather lower the minimum temperature and increase the maximum temperature respectively. For example, the HVAC system in an office building may have the temperature/heat set at 70° during regular business hours and at 65° after hours.  Tenants may request the landlord to extend HVAC service beyond regular business hours by providing advance notice and paying the landlord’s hourly rate for such service, which is subject to change. Depending on the tenant’s square footage, this may not be a viable or cost-effective long-term solution.

Most office leases are full-service gross and include all costs of ownership within the base rental rate. Real estate taxes are based on the assessed value of the property and determined by the applicable municipality’s tax rate and are thus outside the landlord’s control. Operating expenses, on the other hand, which include utilities and HVAC present the opportunity for cost savings through efficient management and/or investment in capital improvements such as energy efficient systems. Because the difference between the base rental rate and the costs of ownership equals the landlord’s net profit and landlords are constrained by market rents, they have an interest in minimizing their controllable expenses in order to maximize their profit. Landlords are able to charge tenants for increases in expenses after the first lease year (base year), but acquisitions are based on a property’s projected net operating income and without a consistent, set schedule acting as a control against which to measure expenses (energy consumption), landlord proformas would be unreliable and their rates of returns unpredictable. Furthermore, the predictability of energy consumption and the associated costs provide landlords with a benchmark against which to measure and identify usage that exceeds normal office use on a per square foot basis. Most leases contain provisions that allow landlords to submeter a tenant’s space, at the tenant’s expense, and require them to make payments directly to the utility provider in cases of excessive use.

Finally, regular business hours also provide the landlord with means to predict and limit wear and tear on a building’s common areas. Tenants may have 24/7, 365-access to their building and space, but visitors and guests do not. Regular business hours restrict access for non-tenants and discourage excessive usage by building tenants by limiting building services and decreasing energy consumption, particularly with regards to HVAC levels; thereby prolonging the life of building systems and finishes and reducing the frequency of and need for repairs, replacements, and capital improvements.

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