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The definition of recoverable operating costs (additional rent) in most commercial leases includes a provision allowing lessors to invoice tenants, in addition to the actual operating costs of a building, administration fees equivalent to 15% of the total actual costs. The rate and method of calculation may vary from lease to lease. Some leases provide that these fees be, for example, equivalent to 5% of the income generated by the building.<\/p>\n
These administration fees are supposed to compensate lessors for the management of their building, the payment of supplier invoices, rent invoicing to tenants and for the remainder of tasks the lessors normally have to perform.<\/p>\n
Beware; over the years, lessors have charged to the operating costs of buildings they manage, an increasingly large part of their general overhead costs that they should assume from their 15% compensation, while continuing to impose an administration fee of 15% on tenants. Some landlords go as far as additionally charging tenants another type of fee, referred to as a management<\/u> fee, for exactly the same service. Some tenants therefore are charged twice the cost for the management \/ administration of their building, in addition to the general overhead expenses of the lessors.<\/p>\n
Indeed, by using very broad and inclusive definitions of recoverable operating costs in their standard leases, some landlords can thus recover substantial additional rent from tenants without improving the quality of services offered to them. This allows landlords to exponentially increase their income while having less and less expenses to cover to generate that income. Here’s what one of those clauses might look like:<\/p>\n
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The recoverable operating costs include all the direct or indirect<\/u> costs of maintenance, repair, replacement, security, housekeeping, insurance, public utilities, operation<\/u>, management<\/u>, administration<\/u>, supervision <\/u>or any other costs related to the building. Without limiting the generality of the foregoing<\/u>, recoverable operating costs include, among others:<\/em><\/p>\n <\/p>\n Some elements of the example have been underlined to demonstrate the far too broad and evasive nature of this kind of definition, which allows landlords to include in recoverable operating costs an almost infinite range of cost types:<\/p>\n\n
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