Lease Audit Information

TOPIC OF THE WEEK:

Management Fees:

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 be managed.

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.