Los Angeles, CA · Member since 2013 · 7 posts · 1 vote
Hi
I have a question regarding calculation of Administrative cost. The lease states that the tenant is to pay 15% of "all of the foregoing costs as an administrative expense" under the "operating costs". Would this include the property tax or no? Only possible clause under what is included is "the cost and expense of complying with all federal, state and local laws, orders, regulations and ordinances applicable to the Property which are now in force".
Among the things that are excluded from the operating costs is "taxes on Landlord's business"
If I'm getting this right, you're a tenant in a screwy lease. No, RE taxes are an owner expense in residential, it also sounds like your lease may be in violation of tenant/landlord laws, get an attorney to review it. :)
Yes I do know we can collect property tax. I am just wondering whether the property tax should be included in calculating the administrative fee- that the property tax be included as a part of Operating cost.
We can't really see the contract, but if you're speaking of accounting, no, I'd not assign taxes as an admin cost, taxes are a line item by itself, makes it easier to compute other items, like net income before taxes. On the rents, you should break out the NNN items as well, then show a total amount due monthly, additional maintenance costs in any period due from the tenant, if any, are just tacked on in that period. How we do it. :)
The tenants are supposed to pay 15% of of the operating cost as Admin Fee. My question is whether the property tax should be included as a part of operating cost. The relevant clause is; "the cost and expense of complying with all federal, state and local laws, orders, regulations and ordinances applicable to the Property which are now in force"----> would this includes property tax?
No, I am not trying to nickel and dime them. I am a new owner and that's what the previous owners had been doing for the past 10 years. I am only trying to verify all the numbers to make sure they comply with the lease terms.
I would opine-YES- property tax is in the CAM- especially when the lease states, "the cost and expense of complying with all federal, state and local laws, orders, regulations and ordinances applicable to the Property which are now in force".
Property tax is a "local regulation" of the property.
However, there should be a clause in the lease that states specifically what the CAM includes- sounds like your lease is somewhat ambiguous on this point- Nevertheless, I would still opine YES