A Black Hole Living in Your Commercial Lease

On April 21, 2010, in Overview, by Admin

Imagine if your Landlord had a Black Hole next to your bank.  No matter how hard you worked and struggled to grow your business, there’s this thing with an insatiable appetite, constantly sucking money out of your account.  You’re told by your Landlord that the money’s used to keep up the beautiful landscaping or to sweep the sidewalks or to haul away the trash.  In reality, the last time somebody watered the plants and swept the walk is when you did it yourself a month ago.

This is often a huge business distraction and what many tenants experience with CAM charges,(Common Area Maintenance), representing one of the three “N’s” of your Triple Net (NNN) Lease.  The lease fees you pay monthly toward CAM are supposed to be used for upkeep and other expenses related to maintaining the property, but are often mismanaged, abused and improperly con­trolled.  Here’s an example…

BITING THE HAND THAT FEEDS

A number of years ago, I worked for a Landlord who was also a “silent” partner in a construction company that he self-contracted with to do maintenance and upkeep around his properties.  (We’ll call them HoseU Construction).  All of HoseU’s regular earnings were gene­rated from the building maintenance work that, coincidentally, was charged back to the tenants through CAM charges.  The landlord used this arrangement as a way to royally hose his tenants by charging ridiculously high hourly labor rates, literally making up work, and providing grossly inferior service and labor.  Heaven forbid if you asked HoseU to do any personal work as you could count on a fabricated bill with over-inflated costs.

Astonish­ingly, this situation continues to this day and that Black Hole keeps sucking up all the tenants’ hard earned money.   Strong audit provisions and expense caps can prevent this type of abuse as well as who represents you when it’s time to negotiate your lease.

 

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