In calculating CAM, does Operating Cost usually include Property Tax?

Question

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"

Thank you,

Eric K. · Answer

You are talking about the CAM, correct?  Do you manage the CAM items yourself and then charge a 15% fee for your services?

Hans Restuccia · Answer

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

Wayne Brooks · Answer

My apology, the previous owner was nickel and diming them.

Jan Lee · Answer

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.

Wayne Brooks · Answer

NO, property tax is not a cost of "complying with governmental regulations".  Try to nickel and dime them some other way.

Jan Lee · Answer

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?

Bill Gulley · Answer

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.  :)

Jan Lee · Answer

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.

Bill Gulley · Answer

Commercial, NNN, then you're good to go. A NNN is with the tenant paying maintenance, taxes and insurance. :)

Jan Lee · Answer

No I am a landlord and this is for  retail NNN commercial property-therefore property taxes are reimbursed by tenants.