| Lease Audit Information
These excerpts are taken
from an article called "How to Show Your Administrative
Fees Are Fair" from a newsletter called "Shopping
Center Management Insider":
On Administrative Fees:
"...tenants don't always feel that they're
getting their money's worth. Some of these tenants refuse
to pay some or all of their assessed CAM charges to protest
high administrative fees."
How to Deal With Tenants:
"One winning strategy is to meet face to
face with them to try to persuade them to pay, says shopping
center executive Alan Alexander. Show them how much effort
it takes to administer your center and the benefits they get
from good administration. Once they understand the value they're
getting for their fees, they're more likely to pay, says Alexander.
How To Convince Tenants That Your Administrative
Fees Are Fair:
"List items covered by the administrative
fee. Let each tenant know about all the tasks of your center
that you supervise. If a tenant understands how many there
are, he or she is more likely to consider your administrative
fee to be justified."
On Administrative Tasks:
"You can say something like: Administering
the common areas is a time consuming job. We are constantly
inspecting the property to see what maintenance work is needed.
We spend much of our time dealing with outside contractors
that provide services to our center. We must supervise work
done by HVAC contractors, roof specialists, lighting specialists,
landscaping contractors, security personnel, tax appeal consultants,
insurance carriers, construction contractors, and other contractors
as the need arises. We first inspect the property, decide
on what has to be done, write a bid specification, get bids
for work that needs to be done, negotiate contracts with contractors,
supervise the contracts while they're being carried out, deal
with any tenant complaints or contractor problems during the
life of the contract, keep and maintain records to ensure
that the contractor is charging a fair amount, and make sure
you're billed that proper amount for the contractor's services.
And we do this for every contractor."
A Specific Example:
"You can say something like: Take the example
of parking lot sweeping. We had to send out bids and determine
which company to hire. We had to set up a plan for our sweepers,
telling them what to sweep, when and how often. We had to
take time to explain the plan to them and then more time to
supervise them, especially at first, to make sure they showed
up and did the job properly. This easily consumed 35 to 40
man hours, which didn't include the time we needed to deal
with special problems that cropped up. We also had to determine
the proper levels of insurance coverage to protect the owners,
managers, and tenants, and be sure that the contractors provided
evidence of such coverage and kept it current. And keep in
mind that this was the time it took to deal with just one
contractor doing a relatively uncomplicated job."
On Other Benefits of Administration:
"You can say something like: You may not
know it, but by spending enough time and effort to administer
the center, we've avoided a number of crises. For example,
during a roof inspection we noticed some cracks and quickly
got them sealed. If we hadn't inspected and acted so promptly,
the damage to the roof might have become major and cost a
lot more to repair. If the problem had gone undetected for
a long time, we might have noticed it only when water started
leaking into your tenant space. But because we take the time
to make regular inspections of the roof, you don't have to
worry about that happening."
On Profit From the Fees:
"Some tenants object to administrative
fees because they believe the management companies are making
a profit on them, or that the salaries of your operations
people and managers are bloated. Consider giving these tenants
a general idea of the range of salaries you pay your operations
people and managers, says Alexander. Doing so can convince
the tenant that salaries are reasonable, making the tenant
likelier to pay. You can say something like: We really need
the fees to cover the salaries of our operations people and
managers. The salaries of most of our operations people and
managers range from $25,000 to $35,000 a year in salary and
benefits, well in line with industry figures."
On Results:
"End your discussion by asking the tenant
if she now is willing to pay the administrative fee. Nine
times out of ten, the tenant will say yes, says Alexander.
Then, if the tenant agrees to pay, ask when you can expect
to get the check."
(Alan Alexander is the Senior Vice President
of Woodmont Real Estate Services of Belmont, CA.)
To receive a copy of the entire article call
1-800-643-8095.
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