LEASE AUDITING CASE STUDY 6

Removal Of Off-Site Manager Fees Saves Tenant $25,000

Client
A national university that occupied 150,000 square feet space in North Carolina

Audit Discovery
Our client built its building and specifically addressed in its lease that the management officers can be only on-site with all other management costs to be prorated accordingly if offered to more than one building. The landlord's management company serviced several locations but the salaries of the manager and engineer were not prorated to solely reflect the costs associated with our client's building.

Resolution
MBG Consulting investigated all management functions, locations, staff salaries, and related allocation according to their level of involvement in our client’s particular building operations. The landlord agreed to revise the expenses to reflect only the management costs related to that specific location.

Lessons

• Ask the landlord to provide the management agreement. Very often the agreement states that the management company is compensated for leasing space, managing the owner's finances, etc. The lease however usually excludes such expenses but landlords often pass through the entire management cost without removing the portions that are disallowed.
• Management fees should be related only to the officers that are directly engaged with the specific building’s operations.