Tenant’s Property Expense Profile – RPI Form 562

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This form is used by an owner and their leasing agent when preparing a marketing package for the lease of a residential property and disclosing the property’s operating costs, to prepare a worksheet to be handed to prospective tenants for their review of the monthly property operating costs and deposits they will likely incur on taking possession of the property.

Your use of RPI Form 562

Operating expenses disclosed to tenants

Prospective tenants and buyers retain brokers to inform them of relevant conditions surrounding a property considered for acquisition. Brokers and their agents are the presumed experts, licensed and trained in the issues affecting pricing and users of property. Relevant information includes the costs of occupying and ongoing operations within a space, collectively called operating expenses.

As for a landlord and their leasing agent, their role in marketing space is limited to:

disclosing facts about the property that adversely affect the value and use of the property; and
avoiding misleading disclosures.

The duty the landlord’s broker owes tenants does not require them to advise tenants about any adverse consequences the disclosed facts might have on them. Advice on the consequences of the facts disclosed is the duty owed to the tenant by the tenant’s broker. Here, the landlord’s broker owes the tenant only a limited general duty of honesty and fair dealing, whereas the tenant’s broker owes the tenant a greater fiduciary duty.

When the tenant is represented by an agent, they receive advice on a property before leasing and are better prepared to make informed decisions when selecting among all available properties.

The role and burden of ascertaining the consequences of a property’s essential facts falls on the tenant’s leasing agent.

The factual information and assistance which a landlord’s broker may offer prospective tenants falls into one of three general categories:

The property’s physical aspects, including square footage, shipping facilities, utilities, HVAC units, tenant improvements, sprinkler system, condition of the structure, soil, geologic hazards, toxic or noise pollution, parking, etc.;
The conditions of occupancy affecting the use and enjoyment of the property, i.e., facts available on request from title companies (CC&Rs, trust deeds and vesting), planning departments (uses permitted), redevelopment agencies, business tax rates, police and fire department response times, security, natural hazards and conditions of the neighborhood surrounding the location; and
The cost of operating the leased premises when put to the expected use.

A property’s operating costs include business taxes local agencies charge a tenant for conducting business in their jurisdiction. Taxes weigh on the selection of available space, as does access to highways and the client’s market if the business is conducted in person. Business taxes vary greatly from city to city, as do police response times and criminal activity.

A property’s operating expenses are part of its signature, distinguishing it from other available properties. Data on a property’s operating costs are gathered and set forth on the property expense profile which is handed to prospective tenants. These profiles are used by leasing agents to induce tenants to rent their landlord-client’s space rather than other comparable space. [See RPI e-book Income Property Brokerage Chapter 16; see RPI Form 562]

Property-related expenditures incurred by a tenant of a specific property during the leasing period are classified as:

recurring operating expenses;
nonrecurring deposits or charges; or
rent and payments on mortgages secured by the tenant’s leasehold.

The contents of the Property Expense Profile for tenants

An owner and their leasing agent use the Tenant’s Property Expense Profile published by RPI (Realty Publications, Inc.) when preparing a marketing package for the lease of a property. It discloses the property’s operating costs to the prospective tenant, allowing them to review the monthly property operating costs and deposits they will likely incur on taking possession of the property. [See RPI Form 562]

The Tenant’s Property Expense Profile contains:

the date, address of the subject property and name of the prospective tenant [See RPI Form 562];
a description of the property type and its location, as well as a checklist stating whether the estimates reflect current expenses of occupancy or are a forecast of anticipated expenses of occupancy [See RPI Form 562 §1];
monthly operating expenses are entered and totaled, then added to the monthly lease payment to arrive at a total monthly expense figure [See RPI Form 562 §2];
deposits are entered and totaled, with a dollar amount allocated to each individual category, such as security, electricity, water, sewage, gas and phone deposits, as well as a space to list other types of deposits not listed, to arrive at a total deposit amount [See RPI Form 562 §3]; and
the landlord’s signature, the prospective tenant’s signature and the information of the tenant’s broker and agent. [See RPI Form 562]