Every practice owner negotiates base rent. It is the number on the first page, the one the broker quotes, the one you compare against the space down the street. And it is not the number that hurts you. The costs that quietly climb year after year — the ones that show up in a reconciliation letter you were not expecting — live in the operating-expense clause. In the leases we review, this is where the real money moves, and it is the section owners understand the least before they sign.
That is not a failure of attention. Operating expenses are described across several dense pages, in defined terms that cross-reference each other, and the bill for them does not arrive until well after you have moved in. By then the language is fixed. So it is worth understanding, in plain English, what you are actually agreeing to pay — and exactly where each piece of it is negotiable in the window before signature.
Gross vs. triple-net: what you're actually agreeing to pay
The first thing to establish is what kind of lease you are holding, because it determines who carries the building's costs.
In a gross (or "full-service") lease, one rent number covers essentially everything — the landlord pays the operating expenses out of what you pay them, and your exposure to increases is limited. In a triple-net (NNN) lease, base rent is only the beginning. On top of it you pay your proportionate share of the building's operating expenses: common area maintenance, property taxes, insurance, and management. Most medical office space is leased on a triple-net or modified-net basis, which means the quoted rent is not your real occupancy cost. Your real cost is rent plus "NNN charges," and those charges reconcile — and rise — every year.
Why it matters: two spaces can quote nearly the same base rent and cost you very different amounts once the net charges are layered in. Comparing base rent alone is comparing half the bill.
Where to negotiate: before anything else, get the estimated NNN or "additional rent" figure in writing and add it to base rent so you are comparing total occupancy cost across options. If the lease is quoted as gross, confirm in the document which expenses are truly included and which can still be passed through — a "gross" lease with a long list of exclusions is closer to net than it looks.
What CAM and operating expenses actually include
Operating expenses — often billed as CAM (common area maintenance) — are the pooled costs of running the building, divided among tenants by square footage. The category typically covers upkeep of shared areas (lobbies, corridors, restrooms, parking, landscaping, elevators), utilities for common areas, property taxes, building insurance, and a management fee paid to whoever operates the property.
Most of that is legitimate. The exposure is in the edges of the definition — what the landlord is allowed to fold into the pool. A well-drafted operating-expense clause runs for a page or more precisely because it is listing what counts, and a landlord-friendly one is broad by design.
Why it matters: the wider the definition, the more of the landlord's cost of owning the building lands on your bill. The two line items that most often deserve a second look are capital expenditures — major replacements like a roof or an HVAC system, which are the owner's asset, not your operating cost — and the management fee, which should be a reasonable percentage of the building's income, not an open-ended number.
Where to negotiate: ask for an exclusions list, and expect these to be on it — capital improvements (except where they genuinely reduce operating costs, which can be amortized over their useful life), the landlord's financing and debt costs, leasing commissions and tenant-improvement costs for other tenants, costs the landlord recovers from insurance, and any capital reserve. Cap the management fee at a stated percentage of gross revenues rather than leaving it undefined — in commercial buildings it commonly runs in the 3–6% range, so a materially higher number deserves a question.
The base year: the number that quietly resets your costs
In many leases — particularly ones quoted as gross or "base-year" — you are not charged for all operating expenses, only for the increases over a fixed starting point. That starting point is the base year: the calendar year whose expense level is baked into your rent, above which you begin paying your share of growth.
Why it matters: the base year is worth real money, and it is easy to get quietly disadvantaged. If the base year is set artificially low — because the building was under-occupied that year, or taxes had not yet reset after a sale or a reassessment — then "increases over base" start accruing almost immediately, and you pay for what is really just the building returning to normal. A related trap is an expense stop set below the building's actual run-rate, which produces the same effect: you are over the threshold on day one.
Where to negotiate: push for the base year to be the first full calendar year of your occupancy, not a prior year you had nothing to do with. Confirm the base-year figure reflects a fully assessed, fully occupied building — a gross-up provision that normalizes variable expenses to full occupancy actually protects the tenant here by preventing an artificially low base. If a property tax reassessment is likely (for instance, after a recent sale), address in writing how that flows through the base year. In Washington the county assessor revalues property every year, so a sale or a climbing market can lift the assessment — and the tax line inside your CAM — the very next cycle.
Controllable vs. uncontrollable expenses
Not every operating expense behaves the same way. It is useful — and increasingly standard — to split the pool into two buckets. Controllable expenses are the ones the landlord's management decisions influence: landscaping, cleaning, non-emergency maintenance, the management fee, staffing. Uncontrollable expenses are the ones nobody at the building sets: property taxes, insurance premiums, and often utilities and snow removal.
Why it matters: this distinction is the foundation of the single most valuable protection in the whole clause. You cannot reasonably ask a landlord to guarantee that property taxes or insurance will not rise — those are outside anyone's control. But you can hold them accountable for the costs their own choices drive. If the two are lumped together, you lose the ability to cap the part that is actually cappable.
Where to negotiate: ask that the lease define the two categories explicitly. It costs the landlord nothing conceptually and sets up the next point.
Capping the controllable increases
Once controllable expenses are defined, you negotiate a ceiling on how fast they can grow. A controllable-expense cap limits the year-over-year increase in that bucket to a fixed percentage — so a management company cannot dramatically expand services (and your share of the cost) without your exposure being bounded.
Why it matters: over a long medical lease, an uncapped controllable pool compounds. A cap converts an open-ended cost into a predictable one you can actually budget around, which for a practice modeling ten years of overhead is worth more than a small concession on base rent.
Where to negotiate: ask for an annual cap on controllable expenses — a ceiling in the 3–5% range is a common ask — and press for it to be non-cumulative, so the increase can never exceed the cap in any single year. Landlords push for a cumulative cap instead, which lets them carry unused room forward from quiet years and claw it back in a heavy one; that is the version that favors them, not you. Confirm taxes and insurance sit outside the cap entirely. Caps are common and landlords expect the ask; the negotiation is over the percentage and the mechanics, not whether one exists.
Annual reconciliation and your right to audit
Through the year you pay operating expenses as monthly estimates. After year-end, the landlord "trues up": totals the actual costs, compares them to what you paid, and either bills you the shortfall or credits the overage. That is the annual reconciliation, and it is where surprise invoices come from.
Why it matters: the reconciliation is only as trustworthy as your ability to check it. Without a contractual audit right, you are taking a landlord-prepared statement on faith — and reconciliations do contain errors, misallocations, and charges that should have been excluded under your own lease.
Where to negotiate: secure the right to audit or inspect the operating-expense records within a defined window after you receive the statement, and make sure the lease keeps that right alive by requiring the landlord to deliver a reconciliation within a set number of days of year-end (a landlord who reconciles late should not be able to bill late). Negotiate a look-back so a discovered error entitles you to recover prior overcharges, and ask that if an audit finds an overstatement beyond a stated threshold, the landlord pays for the audit. Cap how long after year-end the landlord can issue a surprise back-charge at all.
Ask for the last two years of actuals before you sign
Every point above is easier to negotiate when you can see the building's real numbers. Before signing, ask the landlord for the operating-expense reconciliations for the last two to three years — the actual per-square-foot history, not the estimate on the term sheet.
Why it matters: the estimate you are quoted is a marketing number. The reconciliations tell you what the building actually costs to run, whether expenses have been climbing faster than inflation, and whether the base year you are being offered is realistic or set low. Two clinics with identical base rent can have very different operating-expense trajectories, and the history is where you see it.
Where to negotiate: make the request early, in writing, as part of due diligence. A landlord confident in their numbers will share them; hesitation is itself information. Read the trend, not just the latest year — a single low year can mask a steady climb.
None of this is exotic. Operating expenses are a standard, negotiable part of every commercial lease — but only in the window before you sign. After that, the definitions are fixed, the base year is set, and the reconciliation letters arrive on their own schedule for the length of the term. The cost of getting it wrong does not show up on move-in day. It shows up quietly, in year three, in an envelope.