it or not, management fees are frequently hidden within the CAM statement.
Short of calling the landlord ("hey, what's in this bill?")
We suggest you check whether the administrative charge is actually less
than the fixed percentage (usually 15 or 18 percent), of operating costs.
If the landlord has "under charged" the administrative charge,
it usually means that there is a hidden management fee. (We find it
amusing that while most landlords have no problem secretly throwing
in a management fee, many restrain themselves from tacking an administrative
charge onto the management fee (but it's been done!).
All too often, tenants discover too late that theyíve given up their right to audit. Here are some steps you can take to preserve this all-important right:
When leasing, watch out for limitations. Donít agree to "account stated" provisions that are unreasonably short, for example, less than one year. Optimally, you should agree to no less than three years. Also, be careful of provisions limiting the time in which you can audit; some courts may treat these provisions the same as an "account stated" limit.
Donít agree that you will not use a "contingent fee" auditor unless you plan to do the audits yourself or pay a fee. Similarly, donít agree to have a "CPA" only perform the audit. Landlords like these provisions because they know that the best auditors in the business usually work on a contingent fee basis (and retailers usually donít want to pay up-front fees).
Finally, if your lease contains a limitation on your time to audit or an account stated provision and you are unable to complete your audit within that time, at a minimum, send the landlord a letter objecting to the reconciliation upon receipt. You can make that objection even stronger if you point out areas to which you object, for example, the landlord has failed to provide a tenant roster or a breakdown of management charges with the reconciliation.
If you know that an audit may take some time to conduct and settle, you may want to obtain a "tolling and forbearance" agreement, which stops ("tolls") the statute of limitations and prohibits the parties from commencing a lawsuit or other proceeding. The tolling agreement should begin at least on the date that you first requested the audit and give the parties at least one year for its completion.
Download a sample tolling agreement here.
No retailer can afford to overpay its landlord. If you are concerned about your occupancy costs, please click the link to Total Occupancy Solutions, the first and only CAM audit company that combines legal and retail expertise under one roof!
| Leasing | Legal