What is Management Fee?

Definition

A management fee is the compensation paid to a property management company (or the landlord's own management division) for administering building operations, tenant relations, vendor management, and financial reporting. Management fees are typically calculated as a percentage of effective gross revenue or total operating expenses, ranging from 3% to 6% for institutional-quality properties and up to 10-15% for smaller assets. Whether and how the management fee is recoverable through CAM depends on lease terms — many leases cap the recoverable management fee at a specific percentage, while others exclude it entirely from pass-through expenses. The management fee calculation method (percentage of revenue vs. percentage of expenses vs. flat fee) and its treatment under CAM cap provisions are frequent sources of billing disputes and audit findings.