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Question
Landlord is allocating risk management, data processing, payroll accounting and accounts payable directly to common area maintenance. In addition, there is a 15% administrative fee for "indirect administration and overhead". Should not the above be charged as part of the administrative fee and not a direct cost to which an administrative fee is then added?
Mike:
Your question implies that several of the costs being assessed might be double dipping by allocating charges for essentially the same service(s) twice under different labels. I suggest you correspond in writing with the landlord and pose the same question? It should be an interesting response. I would also ask the landlord to define what activities are involved in providing "risk management". Could this be a fee assessed for acquiring insurance coverage - commonly included in the property management services - for the property?
All of the costs you highlight - although I am not certain of what is included in the "Risk management" charges - are commonly services provided as part of the fee that the property manager provides as part of their contract. Can you determine if the overall CAM fees already include the management fee in the aggregate CAM Expense?
There have been many in the industry that have questioned the assessment of "administrative fees" in addition to CAM or Operating Expense reimbursement. To many it is simply a separate fee assessed by the landlord to cover the cost of the CAM billing and collection of those charges by the property management firm.
Although it would be interesting to know the landlord's perspective on these charges, if you have signed a lease that stipulates that these particular expenses shall be included in the CAM expenses, you must pay them to the extent the component fees are "reasonable". If these particular charges are not clearly delineated in the definition of CAM costs in your lease, you are then faced with making a determination of what the "Standard Industry Practice" is in your market area for such CAM charges. The effort to make such a determination would be substantial and would likely require that you hire an industry specialist (Perhaps an experienced property manager or lease auditor) to assist you in this effort.
Good luck in this undertaking.
-Jim
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Answers by Expert:
Jim Avancena, CPM
Expertise
Best qualified to answer questions that involve commercial leases, that is, basic issues as well as the often unexpected effects of the complexities and inter-relationships of the provisions a lease may contain, explain how seemingly innocuous text in your lease can have a major impact on a Tenant or Landlord and their business operations, and the common practices utilized in the industry. I can untangle most matters that may come up from the time a tenant begins searching for a office or store space and the lease acquisition process, concerns related to remodeling/improving the leased premises, moving-in, subletting or assigning the leased space, and a long list of problems that may come up during the lease term and even after a tenant moves out. I have practical experience with most property management issues and resolving landlord and tenant disputes - especially those involving what may appear to be overcharges assessed for additional lease charges like CAM costs, operating expense reimbursement, real estate taxes, utilities, construction improvements etc. Note that I am not an attorney and cannot provide legal advice.
Experience
Thirty years active experience in the commercial real estate industry as a licensed real estate broker in the Washington DC Metro area (DC, Northern Virginia & Maryland). I have been admitted (approved) by the Maryland and DC courts to testify as an expert witness on the subjects of Commercial Leasing and Property Management in the area of standard industry practices. I have had a business for the last 14 years advising virtually every form of business entity from large national corporations to the smallest ma & pa new businesses regarding a wide range of commercial real estate matters in addition to property management and commercial leasing.
Organizations
Currently my three children keep me so busy that it is difficult to participate in organizations with continuing and specific time requirements.
Publications
I publish a local commercial real estate newsletter titled: "Tenants First". My firm was the subject of a high profile Washington Post business section cover page (2.25 full pages) feature story on January 13, 1993; titled "Overcharging Overhead".
Education/Credentials
BA in Political Science from Memphis University, and five years of study in the real estate development summer program at MIT. I was certified as a commercial property manager (CPM-IREM), and currently hold a brokers license in Maryland and the District of Columbia.
Awards and Honors
The same plaques and honors that most others in my industry have earned. I have none that I consider especially meaningful.
Past/Present Clients
Past clients include: The World Bank, George Washington University, National Association of Criminal Defense Attorneys, US Department of Commerce, The American Benefits Council, K-Mart Development, many law firms, a national union, other major organizations, and many, many small business firms and retail operators that I am most honored to serve. I estimate more than 1,500 firms/organizations.
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