Management Fees on a NNN Lease (CA)
I have a client who self manages a commercial building she owns in California.  It is a NNN lease which allows for management fees to be billed to the tenant through CAM.  She does not have a license (utilizes the "owner/operator" clause to manage).  What I am trying to find out is whether or not she can legally charge the tenant a management fee.  Does anyone have experience with this situation?  Any advice would be greatly appreciated.
[{"id": "drshgmy", "text": "As the landlord I\u2019m pretty sure she can charge whatever fees she wants. She will just hope that the tenant isn\u2019t represented by a knowledgeable broker haha. ", "replies": [], "depth": 1}, {"id": "drsi7gr", "text": "If the lease allows it, then yes. However, I would suggest getting a proposal from a management company to 3rd party manage the property. Charge the tenant slightly less than the 3rd party. Then if the tenant pushes back you can offer to hire the 3rd party and they can pay them more.", "replies": [], "depth": 1}, {"id": "drt6uao", "text": "I've heard of a few cases where people accept fees without a license. This was always with another licensed party under the same entity. Totally large scale and legal, as a single entity, you might want to ask the lawmakers. Otherwise it sounds like you're getting into coworking space where the fee is more like a membership and the taxes are structured differently. ", "replies": [], "depth": 1}, {"id": "drtefvr", "text": "This is an excellent question. It can go both wats. She cannot be making money from NNN fees. They must be for recapturing expenses, and not a profit. Therefore, if you use a standard AIR lease, it contains language to which you are entitled as a tenant to see her expenses and calculation for your charges. \n\nRead your lease and ask for her calculations and invoices. ", "replies": [{"id": "drthbbw", "text": "&gt; They must be for recapturing expenses, and not a profit.\n\nSure, but one of the expenses can be reasonable compensation for the property manager.", "replies": [], "depth": 2}, {"id": "drvswen", "text": "&gt; he cannot be making money from NNN fees.\n\nsure you can.  Owners commonly mark up snow removal as example.  I mean you can't just make shit up, but your business entities are allowed to be profitable.", "replies": [], "depth": 2}], "depth": 1}, {"id": "drvst1v", "text": "Depends what the lease says.  This shit is why you use good brokers/lawyers.  I don't think her being licensed or not has any bearing on this unless the lease states only a licensed manager may be used, which isn't a clause I have ever seen.  I have seen them dictate what can be first party and what can't, limiting 1st party fees to 'market rates' capping increases for 1st party fees etc.  \n\nThis isn't a general question with an answer, you have to read the specific lease language that deals with cam.", "replies": [], "depth": 1}, {"id": "dsc9crx", "text": "She can charge whatever the heck she wants as a management fee. Management of the building is not free. Let's say it wasn't an owner occupied building and she wanted a property management firm to manage, she'd be looking at a management fee of 3-5% of gross revenue on the property. But to better answer your question, we self manage everything in our portfolio and we do charge a 20% management fee that is baked into the CAM. Management costs money.. Also, nets are operating expenses ( taxes, insurance, maintenance ) &amp; every year it is required by law that the tenant shall receive details of the exact pro-rata share of thier footprint, so that really doesn't play any roll in anything. You'll read about reconciliation and that just means that if some expenses deviate from the established base year in the lease, the parties shall reconcile depending on who's responsible. ", "replies": [], "depth": 1}]