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…]