CAM Costs – Page 2 – Retail Real Estate Law Ruminations

You Snooze; You Lose; Maybe; Probably

January 15, 2017 By Ira Meislik 3 Comments

What is in the water that many, too many, landlords drink? What can they be thinking? The same can be said (though not as often) about tenants, and we will do so. What is in the water that many, too many, tenants drink? What can they be thinking?

The subject is asking for money rightfully owed to those drinkers. It might be for taxes or it might be for operating expenses, percentage rent, insurance premiums, reimbursable expenses or refunds for the payment of any one or more of those. It might even be for other things such as overdue rent. Yes, why do rightfully billable charges or rightful claims go unbilled or unclaimed until years later when someone wakes up, often, but not always, a successor landlord or tenant?.

[If you] SNOOZE, you [can] LOSE. “Do not spend your days gathering flowers by the wayside, lest night come upon you before you arrive at your journeys end, and then you will not reach it. [Isaac Watts].

If you haven’t experienced the situation or been asked about the following situation yet, it is just that you haven’t been at this real property leasing thing long enough: After “X” years (“X” often being 5 or more) of failing to bill a tenant for taxes or other monies genuinely owed, a landlord sends out a (BIG) bill. Both the tenant and its landlord turn to trusted advisors and ask: “How far back can the landlord go and still have the right to collect what is owed?” [Read more…]

Filed Under: Retail Leases, Retail Real Estate Law Tagged With: Agreements, Ambiguity, CAM Costs, Contracts, Drafting, Landlords, leases, negotiation, Operating Expenses, remedies, retail real estate law, Tenants

The Long And The Short Of It: The Invincible Lease

May 8, 2016 By Ira Meislik 3 Comments

There’s nothing like a mysterious title to draw the flies. Usually, Ruminations knows its destination before it begins each weekly journey. Not so today. Our long-ago set plan was to rant (once again) about the trees lost in the service of creating ever and ever longer agreements. Then, we saw a March 29, 2016 decision from the Court of Common Pleas for the State of Delaware that made us wonder if some agreements aren’t long enough. That opinion made us wonder if courts read our agreements as closely as we write them. That case, and we’ll rant about it soon enough, led us to think about some things written in a very fresh, April 27, 2016 decision from the United States Court of Appeals for the Second Circuit. Can we synthesize all of that? Frankly, “No.” That, however, won’t stop us. [Read more…]

Filed Under: Buying and Selling Properties, Financing Properties, Retail Leases, Retail Real Estate Law Tagged With: Agreements, Ambiguity, CAM Costs, Contracts, Drafting, Landlords, leases, lenders, mortgages, negotiation, retail real estate law, shopping centers, Tenants

A Management Fee Puzzle For Tenants

August 16, 2015 By Ira Meislik 4 Comments

It appears to be generally accepted, though we don’t know why, that management fees are validly included within common area costs (a.k.a. “operating expenses”). We take comfort in something that John Stuart Mill wrote in On Liberty: “It is as certain that many opinions, now general, will be rejected by future ages, as it is that many, once general, are rejected by the present.”

To Ruminations, management fees should be treated as a cost of ownership, not an expense for items that benefit a tenant. The property owner can choose to self-manage what it owns or, in the alternative, it can do little or no work and treat its shopping center or other property as if it was a share of stock in General Motors. It is one thing to seek recovery for the administrative overhead cost of managing the common areas, but quite something else to seek recovery for the cost of managing tenants, working on leasing of the property, dealing with financing issues, bookkeeping, preparing tax returns, and for the performance of similar tasks. [Read more…]

Filed Under: Retail Leases, Retail Real Estate Law Tagged With: Agreements, CAM Costs, Contracts, Drafting, Landlords, leases, negotiation, Operating Expenses, Rent, retail real estate law, shopping centers, Tenants

What’s In A Name? Gross? Net? Does It Make A Difference?

July 19, 2015 By Ira Meislik 2 Comments

Other than giving a general sense of the way the lease deals with variable costs of operating a rental property, the labels, “gross lease” and “net lease” give no usable information. A good rule when it comes to preparing a lease or when reviewing a lease is to look at each obligation and ask two questions: “Who does it? Who pays for it?” In the truest of “net” leases, the tenant does both. You’ll see that most often for a single tenant property where the leased premises include all of the land as well as the building. That can come about in a number of ways, most often when the tenant developed the property and then sold it to an investor (a sale-leaseback). It is also common when a developer does a build-to-suit project for the tenant. Less often, but not rare, is where an existing single-tenant property is leased. In each of those cases, the overwhelming “rule” is that the tenant will do all of the work at its own expense. A very common, though limited exception, is when it comes to the building’s structure and, less often, the building’s roof. A “smart” exception would be that the landlord maintains the property insurance, though the tenant pays that cost. Such a lease is rightly called “triple net,” “net” or, as Ruminations prefers, ‘absolute net.” [Read more…]

Filed Under: Retail Leases, Retail Real Estate Law Tagged With: Agreements, CAM Costs, Contracts, Drafting, insurance, Landlords, leases, negotiation, Rent, retail real estate law, shopping centers, Tenants

How Much Profit Should A Landlord Make From Pass-Through Items?

August 24, 2014 By Ira Meislik 6 Comments

Over the last couple of months, we’ve seen bits and pieces of a discussion (or discussions) as to whether a landlord should make a profit on operating expenses or other pass-through charges. Much of what we’ve seen didn’t appear to be very responsive to that question. It was about protecting one party or the other. That gives Ruminations an opportunity to weigh in on the operative verb: “should.”

You don’t have to get to the bottom of today’s posting to get our view. Simply speaking, it is: “Why not?” [Read more…]

Filed Under: Retail Leases, Retail Real Estate Law Tagged With: Agreements, CAM Costs, Contracts, Landlords, leases, negotiation, Operating Expenses, retail real estate law, shopping centers, Tenants

Getting On The Same Page When It Comes To Operating Expense (CAM Costs) Reporting

July 27, 2014 By Ira Meislik 6 Comments

A lot of trees have been cut down for the paper used to write about operating expenses or common area costs. That’s because when you talk about passing along operating costs, you are talking real money. Yet, aside from deals where the operating expense charge is a fixed (and usually escalating) amount, far less negotiation is had for a nickel or a dime per square foot of operating expenses than is the case with the same nickel or dime of basic rent. Yet, a nickel is a nickel and a dime is a dime [See: John Lee Hooker, Bottle Up & Go], whether called base rent or operating expenses. In sum, like weather, everybody talks about it, but nobody can do anything about it. But, is that really true? In part, “Yes”; in part, “No.” Here’s our attempt to start a discussion – kill more trees. [Read more…]

Filed Under: Retail Leases, Retail Real Estate Law Tagged With: Agreements, CAM Costs, Contracts, Drafting, Landlords, leases, negotiation, Operating Expenses, retail real estate law, shopping centers, Tenants

Do I Have To Pay Operating Expense Charges Or Taxes That My Landlord Just Billed Me For After Five Years?

July 13, 2014 By Ira Meislik 5 Comments

We’ve pondered, actually struggled, to post a piece exploring the answer to the often asked, “Do I have to pay operating expense charges or taxes that my landlord just billed me for after five years?” What we’ve found is that there is no simple answer if the lease in question doesn’t specifically cover delayed billings like this. That’s also true for related questions such as, “We never increased our rent payment after extending its term and now, five years later, our landlord wants all the back rent – do we have to pay?” Or, to, “We’ve been paying the wrong rent, can we get our money back? [Read more…]

It’s The Occupancy Cost, Not Just The Rent, Stupid

February 16, 2014 By Ira Meislik 6 Comments

Sitting, as we are, in the northeast, with what seems to be a steady barrage of snow and ice storms, our thoughts naturally turn to “occupancy costs.” Before readers call for the white coated bearers of big nets to take us in, let us explain. But, first we’re going to Ruminate a little more.

At one time, the prices quoted by hotels and airlines could be held next to one another to find a good deal. No longer. Now, even they have “unbundled.” That would be fine if it were easy to “build and then price” your own travel package. But, it isn’t. [Want a pillow, a movie, and a hummus platter?]

Shop for a rental car today. Look at the web price and then get to the counter: “return the tank full; pay $9.00 a gallon; buy a tank from us at $3.35 a gallon; add a driver; return an hour late; and, it goes on an on.” When you go to ebay.com to buy something, be sure to sort by “price plus shipping.” [Read more…]

Filed Under: Retail Leases, Retail Real Estate Law Tagged With: CAM Costs, Landlords, leases, negotiation, Operating Expenses, retail real estate law, shopping centers, Taxes, Tenants