Lease Audit Information
TOPIC OF THE WEEK:
If your lease states that Landlord may include "the costs
of operating, repairing, maintaining, securing and managing
the common areas", this does not mean that Landlord can
charge a home-office management fee. A management fee is not
for the management of the common areas. The management fee
is compensation for a management company to "manage"
the shopping center, which can include leasing, marketing,
accounting, public relations, tenant relations, development,
overhead expenses, administrative expenses and profit. In
most cases, none of the management fee is used for managing
the common areas. In a mall, the management of the common
area is the responsibility of the on-site management: the
operations manager, the security manager and the janitorial
manager. The general manager may be the superior of these
managers, but the general manager rarely has duties relating
to the common areas of the center. If your lease allows for
"managing the shopping center", then the general
manager should be allowed also. However, the management fee
for off-site management should still not be included. The
off-site management usually consists of upper-management and
administrative personnel necessary in managing multiple centers.
If the Landlord did not own multiple centers, there would
be no need for an off-site management office.
In a strip center, depending on the size, there is not much
need for common area management. There may be very limited
management costs necessary in hiring contractors and inspecting
the common areas, but there is no need for daily management
of the common areas unless there are on-site employees to
Regardless, if you have questions, make sure you are able
to review the contract between the Landlord and the management
company. The contract must include detailed specifications
relating to the duties of the management company.
*Note - in many cases Landlords like to hide the management
fee in other accounts so it is not easily discovered. However,
in some of these cases, the Landlords do not charge the administrative
fee on top of the management fee. If the administrative fee
being charged is less than the correct percentage of the total
costs, do not think the Landlord made a mistake in your favor.
If you have any
questions, concerns or ideas for this site, please do not
hesitate to contact us!