new commercial building owner. have tenants that are paying base rent, and additional rent (common costs). what should be included in the common costs, and should I have a "repair fund" or something like that included in the common cost?
It's all in the title haha. I appreciate your knowledge
[{"id": "ihaoexi", "text": "What type of commercial property is it? You\u2019ll want to include maintenance costs from past year, taxes, property insurance, etc. \n\nI wouldn\u2019t think you would pre-charge for a \u201crepair fund\u201d vs sending out CAM reconciliation bills that everyone hates.\n\nRemember Common costs (CAM) are estimates based on last years info.", "replies": [], "depth": 1}, {"id": "ihaysco", "text": "NNN is for expenses that occur (annually), not anticipated (long term).", "replies": [], "depth": 1}, {"id": "ihb6u73", "text": "You can have reserves usually around .10-.15 PSF", "replies": [], "depth": 1}, {"id": "ihbpula", "text": "As a common courtesy at the start of each year, landlords should send CAM to each tenant based on their %. CAM should list known recurring expenses and amounts for taxes, insurance, HVAC maintenance, parking lot maintenance, landscaping maintenance, etc. At least that\u2019s what we do for our small commercial center with mom and pop tenants.", "replies": [{"id": "ihe86w4", "text": "Nailed it. This is all budgeted annually so it is a predictable expense. Accruals are reconciled in Q1 of the next year and tenants will either get a credit or owe based on what the actual vs billed ends up being.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ihc79u9", "text": "Read what is allowed in each lease", "replies": [], "depth": 1}, {"id": "ihd1yol", "text": "What does it state in the leases? And what do you want to include moving forward?", "replies": [], "depth": 1}, {"id": "ihebn40", "text": "I\u2019d say generally no. You don\u2019t accrue either repair expenses nor repair Capital expenditures. \n\nWe\u2019re making a ton of assumptions without reading your leases.", "replies": [], "depth": 1}, {"id": "ihlh0ln", "text": "Ideally, you should have the general ledger from the base year to see what they included as a comparison. \n\nI had one property where the owner leased the HVAC system and passed back the lease to the renters. This is highly unusual, but none of the tenants complained.\n\nWith the lease expiring, the tenants now are seeing expenses lower than prior years and therefore lower total rent than prior years.\n\nThis is unusual since it typically would be viewed as a capital expense that cannot be passed back to tenants.\n\nI have heard of other crazy instances where an owner will pay to patch a leaky roof multiple times a year that ends up costing as much as a new roof, but obviously mediocre patch work instead of a better new roof. This is done so the owner can pass back the entire amount in a NNN lease or a decent amount of it in a base year office lease.\n\nThe repair fund is for general maintenance items you would expect to incur over the course of the year that are not capital expenses and in common areas  Things that would be ok such as patching pot holes, and painting and sealing the parking lot. Fixing the broken elevator and deep cleaning carpets. If the maintenance problem is in a tenants unit then that expense may be able to be billed in full back to a tenant such as lightbulb replacement or clogged drains depending on the lease language.", "replies": [], "depth": 1}]