Common Area Maintenance Charges

Common Area Maintenance Charges

Many commercial leases require tenants to pay common area maintenance charges like parking lot maintenance, sewage, repairs, central heating and air, and any other services the building owner or manager offers.

The classification of charges incurred and their calculation can present complicated issues. Is the replacement of the HVAC system a repair or a capital improvement?  Is it chargeable as common area maintenance or not?

Because commercial landlords and tenants often bargain and negotiate over these provisions, they can be tailored to the parties’ needs. However, this can make offering general advice or rules challenging. Notice deadlines are sometimes provided in a lease and then forgotten as soon as the lease is signed.

Many disputes could be prevented if a competent lawyer explained matters to each side as the lease is being negotiated and again after it is signed. A lease with key dates built into one provision or another should be reviewed at least annually with the important dates calendared.

Many leases have the right to audit such charges built in, but the right can be lost if the audit is not conducted within a time frame. And the audit usually is permitted only at the tenant’s expense, unless a significant overcharge is found.

In some cases, the service providers are owned in whole or in part by the landlord or affiliates of the landlord. The lease should require disclosure of this or provide that only market rates may be charged.

If you think something is wrong about the classification of appropriate charges or their calculation, consult a lawyer or accountant or both to ensure that you are not inadvertently subsidizing someone else’s business or paying more than your fair share.