Misc Anyone here in commercial real estate or a commercial landlord? - Page 2

**Rain Man** · 03-12-2009, 04:33 PM

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.

**Buck** · 03-12-2009, 06:30 PM

The Real Estate company who owned the building our company was in for 15 years from 1992 to 2007 decided 1 year after we signed a 5 year least that they were raising the rates and it was non-negotiable.

Well, in Sept. 2007 we moved out and found a new place, but the building they forced us out of has been sitting empty, tenant-free, since then.

Stupid ****ers.

FAX · 03-12-2009, 06:32 PM

Quote:

Originally Posted by MediaCenterJunkie

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.

The parking garage that my building (down on 3rd Avenue where parking is at a premium anyhow) used was a multi-level, private garage next door with whom the landlord had a deal. His rationale for the increase was an increase in his costs. But, the fees were almost double which didn't make a whole lot of sense. So, we asked that he show us what his costs for parking were. A very simple request.

In Mr. Rain Man's case, the increase is pretty dramatic, don't you think? From $400 to $2100? For common area maintenance? Something's up, peep.

FAX

**Buck** · 03-12-2009, 06:33 PM

Quote:

Originally Posted by FAX

The parking garage that my building (down on 3rd Avenue where parking is at a premium anyhow) used was a multi-level, private garage next door with whom the landlord had a deal. His rationale for the increase was an increase in his costs. But, the fees were almost double which didn't make a whole lot of sense. So, we asked that he show us what his costs for parking were. A very simple request.

In Mr. Rain Man's case, the increase is pretty dramatic, don't you think? From $400 to $2100? For common area maintenance? Something's up, peep.

FAX

Yeah, and that $2100 isn't a flat fee...its per month.

I want to know what it is thats costing him an extra $2100 a month that hes passing on to his customer???

FAX · 03-12-2009, 06:42 PM

Quote:

Originally Posted by MediaCenterJunkie

Yeah, and that $2100 isn't a flat fee...its per month.

I want to know what it is thats costing him an extra $2100 a month that hes passing on to his customer???

Exactly so, Mr. MediaCenterJunkie. I mean, maybe it's all justifiable. Perhaps improvements are being made. Or, the cost of illegal labor has gone up. Or, insurance costs have increased. Or, maybe they're hiring strippers to entertain the groundskeepers on break.

Whatever it is, if the tenants jointly decide that it's too damn expensive, they're going to move out sooner or later. Meanwhile, by requesting an audit, Mr. Rain Man is firing a shot across their bow and, if the landlord is smart, he'll realize that he's going to lose the tenants if the fees can't be justified - or even if they can. So, maybe they'll change their plans and, instead of live strippers, they buy some DVDs. One can hope.

FAX

Hog's Gone Fishin · 03-12-2009, 06:50 PM

Quote:

Originally Posted by MediaCenterJunkie

The Real Estate company who owned the building our company was in for 15 years from 1992 to 2007 decided 1 year after we signed a 5 year least that they were raising the rates and it was non-negotiable.

Well, in Sept. 2007 we moved out and found a new place, but the building they forced us out of has been sitting empty, tenant-free, since then.

Stupid ****ers.

THIS!

And I hate that term!

FAX · 03-12-2009, 06:50 PM

Quote:

Originally Posted by MediaCenterJunkie

Yeah, and that $2100 isn't a flat fee...its per month.

I want to know what it is thats costing him an extra $2100 a month that hes passing on to his customer???

Wait just a ding dang dangly dong minute here. Is my math correct?

If Mr. Rain Man is occupying 6 percent of the building and he's being charged $2100 per month, that's a total of $35,000 dollars per month for common area maintenance fees for a 100,000 sf building? Is my math wrong?

That's a hell of a lot of money for what? Grass seed? Window cleaner? Potted plants? Hallway floor wax?

What am I missing here?

FAX

wutamess · 03-12-2009, 06:56 PM

Dave Lane is.

**Rain Man** · 03-12-2009, 07:06 PM

Okay, I've been doing some research on this, and here's the deal.

First, I'm a bit of a moron, and I'm really not too happy with my initial Realtor who negotiated my lease.

The lease says that the landlord pays all utilities and other stuff, but then has an "operating cost" adjustment built in. Long story short, they pay all building expenses at 2005 rates, but any increases are covered by us based on our proportion of the building. I asked my Realtor what the impact of this was, and she said, "Oh, it's small. No big deal." And for the first couple of years, it was small. But with inflation, every year builds on top of the previous year, so it gets larger over time.

I'm not happy about that, because essentially it ensured that my rent was going to go up quickly over time. We had a regular rent increase built in, but this comes on top of it, so I'm getting a double whammy on costs, ensuring that my lease cost will go up faster than inflation.

That's my fault, though. I should've figured it out, but this was my first real commercial lease. The Realtor was a friend of ours, and so I can't really go back and nail her. We even had an attorney review it, and he never said anything about this. Everything I was told was that it was nothing to worry about and was a minor thing.

However, the rest of the story is that it wouldn't have been good, but it wouldn't have been intolerable if the landlord wasn't stating massive increases in costs. According to the documentation they've provided over the years, their reported water costs have tripled in three years, as have their building maintenance costs and insurance costs. The cost of "supplies" has gone up by 57% per year, even though it's small. Other costs have gone up significantly faster than inflation as well. The only thing that has gone up slower is property taxes, which haven't really changed.

Overall, their records show an annual increase of almost 12 percent per year in costs, when Denver's inflation rate over that time has been about 3 percent per year. This is all being added directly to the tenants' rents, and it's going up exponentially. In looking at our records, my earlier increases were along the lines of $30 to $80 per month. Last year it went to $400 and this year it went to $2,100.

Methinks I'm going to definitely demand the files that show all those costs tripling in three years. And even if they can provide receipts, I wonder if I can make a claim that the lease assumes good-faith management on their part, and if they're that bad at managing a property, then I shouldn't have to pay for their incompetence.

Here's another kicker. They initially had a clause in our lease that would've increased it further if the building was less full. So for example, if the health club moved out of their five floors, we would've had to double our cost to account for half the building being vacant. At the time, we couldn't even decipher the legalese (and the lawyer couldn't either), but we knew we didn't want anything that raised our costs if the building wasn't leased, so we had it taken out. If we hadn't, we would've been assessed another $200 or $300 a month on top of the $2,100.

**Rain Man** · 03-12-2009, 07:13 PM

Quote:

Originally Posted by FAX

Wait just a ding dang dangly dong minute here. Is my math correct?

If Mr. Rain Man is occupying 6 percent of the building and he's being charged $2100 per month, that's a total of $35,000 dollars per month for common area maintenance fees for a 100,000 sf building? Is my math wrong?

That's a hell of a lot of money for what? Grass seed? Window cleaner? Potted plants? Hallway floor wax?

What am I missing here?

FAX

Here's the other thing that I didn't know until today. They call it CAM (Common Area Maintenance), but it's really the whole building's costs. We're not paying a pro-rated share of common area utilities and maintenance and stuff, it's the whole building's costs. The lease says "operating costs" and says it's for the whole building, but the letters we get each year refer to it as CAM.

I think my Realtor misread it as being CAM, and it's not.

**Rain Man** · 03-12-2009, 07:18 PM

On the other hand, if we have hyperinflation, there's a very bad clause for them in the lease that says I can renew for five years at a very minor cost increase. I bet then that water costs would increase 100,000 percent, though.

**DaFace** · 03-12-2009, 07:23 PM

How are they calculating our share of everything - especially water costs? I can't imagine our water costs are more than $50-$100 per month, where the health club has to be dramatically higher since they have showers and such.

And isn't the health club only two floors?

FAX · 03-12-2009, 07:27 PM

When you back up and take the 50,000 foot view, Mr. Rain Man, I find it incredible (literally) that a 100,000 sf building requires "common area maintenance" costs in the $400,000 plus per year range (over and above utilities). If I were in your shoes and required to contribute to that budget, somebody would have to show me how those funds were being used.

FAX

**Rain Man** · 03-12-2009, 07:30 PM

Quote:

Originally Posted by DaFace

How are they calculating our share of everything - especially water costs? I can't imagine our water costs are more than $50-$100 per month, where the health club has to be dramatically higher since they have showers and such.

And isn't the health club only two floors?

It's all based on square footage, so we all share.

However, the health club was here before we arrived, so their water usage was included in the base costs. Their water shouldn't matter unless they're dramatically increasing their water use, and I don't think that's happening. I also looked up commercial rates, and they've increased them in the summer and decreased them in the winter this past year. The health club should have pretty steady year-round demand. I don't know how rates have changed in the past - I know they've gone up, but I doubt that they've tripled.

They actually have five floors, but most are low-impact.

6 - Locker rooms
7 - Weight room
8 - Pilates and stuff
9 - Gymnasium
10 - Basketball court, though technically that's on the roof, so I guess they only have 4 floors of a 9-floor building instead of 5 of 10.

**DaFace** · 03-12-2009, 07:31 PM

Well, it definitely has more than two floors. I guess I've just never paid that much attention. Still, how do they fit five floors up there?

FAX · 03-12-2009, 07:32 PM

Quote:

Originally Posted by Rain Man

Here's the other thing that I didn't know until today. They call it CAM (Common Area Maintenance), but it's really the whole building's costs. We're not paying a pro-rated share of common area utilities and maintenance and stuff, it's the whole building's costs. The lease says "operating costs" and says it's for the whole building, but the letters we get each year refer to it as CAM.

I think my Realtor misread it as being CAM, and it's not.

Ah ... well, that changes things somewhat. Still, it would be nice to know the comparables in your area.

FAX

03-12-2009, 04:33 PM
Rain Man Seize life. Be an ermine. Join Date: Jul 2001 Location: My house Casino cash: $-692449 VARSITY	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.
Posts: 145,518

03-12-2009, 06:30 PM	#16
Buck Take a Chill Pill Join Date: Nov 2006 Location: South Carolina Casino cash: $5980295	The Real Estate company who owned the building our company was in for 15 years from 1992 to 2007 decided 1 year after we signed a 5 year least that they were raising the rates and it was non-negotiable. Well, in Sept. 2007 we moved out and found a new place, but the building they forced us out of has been sitting empty, tenant-free, since then. Stupid ****ers.
Posts: 44,607

03-12-2009, 06:56 PM	#22
wutamess MVP Join Date: Aug 2000 Location: Lee's Summit Casino cash: $4711637	Dave Lane is.
Posts: 8,290

03-12-2009, 07:06 PM	#23
Rain Man Seize life. Be an ermine. Join Date: Jul 2001 Location: My house Casino cash: $-692449 VARSITY	Okay, I've been doing some research on this, and here's the deal. First, I'm a bit of a moron, and I'm really not too happy with my initial Realtor who negotiated my lease. The lease says that the landlord pays all utilities and other stuff, but then has an "operating cost" adjustment built in. Long story short, they pay all building expenses at 2005 rates, but any increases are covered by us based on our proportion of the building. I asked my Realtor what the impact of this was, and she said, "Oh, it's small. No big deal." And for the first couple of years, it was small. But with inflation, every year builds on top of the previous year, so it gets larger over time. I'm not happy about that, because essentially it ensured that my rent was going to go up quickly over time. We had a regular rent increase built in, but this comes on top of it, so I'm getting a double whammy on costs, ensuring that my lease cost will go up faster than inflation. That's my fault, though. I should've figured it out, but this was my first real commercial lease. The Realtor was a friend of ours, and so I can't really go back and nail her. We even had an attorney review it, and he never said anything about this. Everything I was told was that it was nothing to worry about and was a minor thing. However, the rest of the story is that it wouldn't have been good, but it wouldn't have been intolerable if the landlord wasn't stating massive increases in costs. According to the documentation they've provided over the years, their reported water costs have tripled in three years, as have their building maintenance costs and insurance costs. The cost of "supplies" has gone up by 57% per year, even though it's small. Other costs have gone up significantly faster than inflation as well. The only thing that has gone up slower is property taxes, which haven't really changed. Overall, their records show an annual increase of almost 12 percent per year in costs, when Denver's inflation rate over that time has been about 3 percent per year. This is all being added directly to the tenants' rents, and it's going up exponentially. In looking at our records, my earlier increases were along the lines of $30 to $80 per month. Last year it went to $400 and this year it went to $2,100. Methinks I'm going to definitely demand the files that show all those costs tripling in three years. And even if they can provide receipts, I wonder if I can make a claim that the lease assumes good-faith management on their part, and if they're that bad at managing a property, then I shouldn't have to pay for their incompetence. Here's another kicker. They initially had a clause in our lease that would've increased it further if the building was less full. So for example, if the health club moved out of their five floors, we would've had to double our cost to account for half the building being vacant. At the time, we couldn't even decipher the legalese (and the lawyer couldn't either), but we knew we didn't want anything that raised our costs if the building wasn't leased, so we had it taken out. If we hadn't, we would've been assessed another $200 or $300 a month on top of the $2,100. __________________ Active fan of the greatest team in NFL history. Last edited by Rain Man; 03-12-2009 at 07:15 PM..
Posts: 145,518

03-12-2009, 07:18 PM	#25
Rain Man Seize life. Be an ermine. Join Date: Jul 2001 Location: My house Casino cash: $-692449 VARSITY	On the other hand, if we have hyperinflation, there's a very bad clause for them in the lease that says I can renew for five years at a very minor cost increase. I bet then that water costs would increase 100,000 percent, though. __________________ Active fan of the greatest team in NFL history.
Posts: 145,518

03-12-2009, 07:23 PM	#26
DaFace Kind of a mod Join Date: Aug 2005 Location: Donkey Land Casino cash: $-1893101	How are they calculating our share of everything - especially water costs? I can't imagine our water costs are more than $50-$100 per month, where the health club has to be dramatically higher since they have showers and such. And isn't the health club only two floors?
Posts: 53,154

03-12-2009, 07:27 PM	#27
FAX testing ... 1, 2, 3 Join Date: Oct 2004 Location: Tennessee Casino cash: $6753759	When you back up and take the 50,000 foot view, Mr. Rain Man, I find it incredible (literally) that a 100,000 sf building requires "common area maintenance" costs in the $400,000 plus per year range (over and above utilities). If I were in your shoes and required to contribute to that budget, somebody would have to show me how those funds were being used. FAX
Posts: 44,492

03-12-2009, 07:31 PM	#29
DaFace Kind of a mod Join Date: Aug 2005 Location: Donkey Land Casino cash: $-1893101	Well, it definitely has more than two floors. I guess I've just never paid that much attention. Still, how do they fit five floors up there?
Posts: 53,154