Lease Audit Information

TOPIC OF THE WEEK:

Administrative Fees:

If your lease states that Landlord may include an amount "equal to" or "not to exceed", a certain percentage (usually 10% or 15%) of the total common area costs for administrative expenses, this amount should cover all administrative costs, whether Landlord chooses to incur them on-site or off-site.

Normal administrative costs include: computer expenses, telephone expenses, travel expenses, postage, office equipment, office supplies, office payroll, consulting fees, accounting expenses, overhead expenses, etc.

The fee is negotiated by the parties to the lease as a reasonable amount for all administrative expenses. In most cases, the fee is greater than the actual administrative expenses incurred.

If Tenants allow on-site administrative expenses and the administrative fee, what is to keep the Landlord from then transferring all administrative responsibilities to the center in order to profit from the fee charged?

Click Here to read some interesting excerpts from an article on administrative fees from "Shopping Center Management Insider". This newsletter is directed at Landlords, however we think based on this article, that Tenants may benefit more from a subscription. This article not only supports our position, but also illustrates several other CAM and non-CAM expenses that are covered by the administrative fee. (Note - the Board of Advisors to this newsletter includes an attorney from General Growth Management and a manager from Taubman.)

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