Administrative / Management Fee
The percentage fee charged by the landlord (or its management company) on top of recoverable operating expenses, typically ranging from 3% to 5% of gross collected revenue or operating expenses.
Model Lease Language Variations
“Operating Expenses shall include a management fee equal to the greater of (i) five percent (5%) of Gross Revenue or (ii) the actual management fee paid by Landlord to its property manager.”
5% of gross revenue as a floor. If actual management fee is lower, landlord still charges 5%. Gross revenue base includes rent, parking, and other income — producing a larger fee.
“Operating Expenses shall include a property management fee not to exceed four percent (4%) of gross collected revenues for the Building. The management fee shall be the lesser of (i) the actual fee paid to the property manager or (ii) four percent (4%) of Gross Revenue.”
Capped at 4% with actual-fee limitation. Prevents landlord from profiting on the management fee spread.
“Operating Expenses shall include a management fee not to exceed three percent (3%) of Net Collected Revenue (excluding parking and any reimbursement income). In no event shall the management fee include supervisory or construction management fees, leasing commissions, or overhead of Landlord's affiliated management company in excess of market rates.”
3% cap on net revenue (smaller base than gross). Explicit exclusion of construction management and leasing costs. Affiliated-entity market-rate limitation.
Calculation Methodology
1. Determine the fee base: gross revenue, net revenue, or total operating expenses. 2. Apply the management fee percentage to the base. 3. Compare to the actual fee paid to the property manager (if lease requires lesser-of test). 4. Include the permitted amount in the operating expense pool. 5. Allocate to tenants as part of their pro rata share.
Common Drafting Errors
Not defining 'gross revenue' vs. 'net revenue' — gross includes parking, signage, and reimbursement income, significantly increasing the fee base
Failing to address affiliated management companies — landlord pays an above-market fee to its own entity, inflating recoverable expenses
Omitting whether the management fee is included or excluded from CAM cap calculations
Not distinguishing between property management fees and asset management fees — asset management is typically a landlord cost, not recoverable
Relevant Case Law
Tenant challenged a 5% management fee charged by landlord's affiliated entity when market rate was 2.5-3%. Court found affiliate fee was above-market and limited recovery to 3%.
Billing System Implications (Yardi / MRI)
In Yardi, management fees can be configured as a percentage of revenue or as a fixed charge code within the operating expense pool. Common error: double-counting the management fee — including it as both a separate line item and embedded in the recovery pool total. In MRI, verify that the management fee charge code is mapped correctly and that the percentage base matches the lease definition.
CapVeri Analysis
Management fees are a frequent source of tenant disputes, particularly when charged by affiliated entities. The fee base definition (gross vs. net revenue) can create a 30-40% difference in the actual fee amount. CapVeri flags management fees that exceed market benchmarks and identifies double-counting errors.
Related Resources
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