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Old 03-12-2009, 04:33 PM  
Rain Man Rain Man is offline
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Anyone here in commercial real estate or a commercial landlord?
My office landlord assesses us a Common Area Maintenance charge every year where they estimate the costs, and then add it to our rent. Up until last year it was reasonable, and at that point they added about $400 a month to our rent, which was about $7,000 a month. I wasn't too happy about that. Before that I think it was negligable.

I just got a letter today where they claim that this charge is going to be $2,100 a month for the next year. So they're claiming that the Common Area Maintenance cost has quintupled this year. This would be a 20%+ increase in our rent in a market where deals abound.

WTF is up with this? I think I'd rather pay a lawyer to break the lease than pay these thieves $25,000 this year. We've received no extra services and I don't think the janitor has quintupled their price.

Anyone know what a reasonable charge is?

We had a real estate attorney review our lease before we signed it (5 years ago). If this is really allowable in our lease, I'm going to be making a pretty hostile visit to that attorney.
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Old 03-12-2009, 04:37 PM   #2
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Sounds to me like a back-door rent increase.
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Old 03-12-2009, 04:49 PM   #3
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That's absurd, Mr. Rain Man. How many tenants in the building?

I ask because a similar thing happened in one of my office suites several years ago. Our case had to do with parking charges, though. We organized the tenants, hired an attorney who requested an audit of the landlord's books in order to justify the increase in rates. Amazingly, they backed off the increase immediately without showing the books.

Print up a flyer and distribute it to the tenants. Pool a retainer, hire an attorney (if there isn't one already in the building who will do it for free), and demand an audit. That should solve the problem.

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Old 03-12-2009, 04:51 PM   #4
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Old 03-12-2009, 04:55 PM   #5
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Originally Posted by FAX View Post
That's absurd, Mr. Rain Man. How many tenants in the building?

I ask because a similar thing happened in one of my office suites several years ago. Our case had to do with parking charges, though. We organized the tenants, hired an attorney who requested an audit of the landlord's books in order to justify the increase in rates. Amazingly, they backed off the increase immediately without showing the books.

Print up a flyer and distribute it to the tenants. Pool a retainer, hire an attorney (if there isn't one already in the building who will do it for free), and demand an audit. That should solve the problem.

FAX

It's a ten-story building with about 100,000 square feet, and we have about 6 percent of that. One client has five full floors, two others have one floor, and we have half a floor. The rest is scattered among smaller tenants, and about 10 or 15 percent is vacant.

I'm definitely going to be talking to the other tenants and will demand an audit. My concern is whether the five-floor tenant (a health club) has some other deal struck since they have multiple health clubs in the city, but I bet the other tenants will be interested in participating.
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Old 03-12-2009, 05:00 PM   #6
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Quote:
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It's a ten-story building with about 100,000 square feet, and we have about 6 percent of that. One client has five full floors, two others have one floor, and we have half a floor. The rest is scattered among smaller tenants, and about 10 or 15 percent is vacant.

I'm definitely going to be talking to the other tenants and will demand an audit. My concern is whether the five-floor tenant (a health club) has some other deal struck since they have multiple health clubs in the city, but I bet the other tenants will be interested in participating.
On the surface, it sounds as though you have enough large tenants to garner their interest and who can afford to pool some money for a retainer, Mr. Rain Man.

My advice, however, is to hire an attorney to request the audit. It should only cost you about $500 or so. That was the key in our case. Once the landlord realized that they were dealing with a law firm representing a majority of the tenants, they suddenly backed off the increase and found other ways to economize. Funny, that.

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Old 03-12-2009, 05:11 PM   #7
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I have commercial real estate with a shared tenant structure, but only 12,000 sq. ft. In a smaller town, there is no cam charges or whatever you have it just built into your base lease. If something costs me more than I expected, I just eat it.

I would do the same, ask for an audit.

How tough is office space to find in your area? Is there a risk you will move?

No landlord wants to lose a steady paying long-term tenant.
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Old 03-12-2009, 05:17 PM   #8
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That's outrageous. Do you have more vacancies in the building than you used to? Sounds to me like they're trying to recoup some profit from lost tenants or something.
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Old 03-12-2009, 05:27 PM   #9
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Is your land lord the same person that DC went out with, because it sounds to me like you're getting rear-ended harder than he did. no grease.


Given the current commercial business climate, with so many businesses going under, I'd think this philosophy would be counter-productive. Maybe you know a guy who would do some market research on other commercial realestate agreements in the greater Denver metropolitan area, that bRainman, INc could use as a "negotiation tool".
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Old 03-12-2009, 06:01 PM   #10
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... Given the current commercial business climate, with so many businesses going under, I'd think this philosophy would be counter-productive. Maybe you know a guy who would do some market research on other commercial realestate agreements in the greater Denver metropolitan area, that bRainman, INc could use as a "negotiation tool".
Actually, under the circumstances, that's not a bad idea at all. Assign someone to make some calls and determine the comparables. That should only take a day or so. Very helpful to know when the poop starts flying.

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Old 03-12-2009, 06:02 PM   #11
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Legally speaking, can you request proof of the increase of their costs?
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Old 03-12-2009, 06:13 PM   #12
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Legally speaking, can you request proof of the increase of their costs?
Absolutely. Anytime anyone charges you money, you have every right to fully understand the justification, Mr. MediaCenterJunkie (if that's your real name).

Even though the lease might be written to allow the landlord to alter fees, it's within a tenant's rights to know the reason behind any increases. And, if there's cause to believe the charges are improper or exorbitant, a request to audit those charges isn't unreasonable. Anyhow, that's why a group of tenants represented by an attorney is helpful. Basically, all we did was bluff the landlord. In my case, the parking fee increases were outrageous and the tenants wanted to know why. Show me why it's justified before I write the check - that's all. The landlord decided that it was in his best interest to cancel the increase rather than deal with the request for an audit. Makes you wonder why.

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Old 03-12-2009, 06:16 PM   #13
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So he just needed more money for whatever reason and decided to say that parking now costs more?

At any time did he or his real estate company make improvements to the parking lot, or was it exactly the same? This is including time after you requested the audit...I.E. was he planning on re-paving the Parking Lot so thats why he asked for money?

If not, thats pretty ridiculous.
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Old 03-12-2009, 06:20 PM   #14
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I would suggest sending them back a letter stating that you will be forced to move under these economic conditions if this increase is non negotiable.
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Old 03-12-2009, 06:28 PM   #15
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