Is Your Landlord Overcharging You? A Guide for Brevard County Businesses

As a business owner in Brevard County, you're likely focused on growth, innovation, and serving your customers. The last thing you want to worry about is whether your commercial lease is costing you more than it should. 

One area where costs can sometimes become inflated is in operating expenses, also known as "OpEx" or "CAM" (Common Area Maintenance) charges. These are the costs associated with maintaining the property you lease, and it's crucial to understand them to ensure you're not being overcharged. REACH Commercial Real Estate is here to help you navigate this complex area.

What Classifies As Operating Expenses?

Operating expenses cover the costs of running and maintaining a commercial property. These can include:

• Property Taxes: The annual taxes levied on the property.

• Insurance: Coverage for the building and common areas.

• Maintenance and Repairs: Costs for upkeep, repairs, and landscaping.

• Utilities: Water, sewer, and sometimes electricity for common areas.

• Management Fees: Compensation for the property management company.

• Security: Costs for security personnel or systems.
  

Your lease agreement should clearly define which expenses are included in OpEx and how they are calculated. Typically, tenants pay a pro-rata share of these expenses, based on the percentage of the building they occupy.

Common Landlord Overcharging Scenarios

Several scenarios can lead to tenants being overcharged for operating expenses:

• Incorrect Calculations: Errors in calculating the pro-rata share or the total expenses.

• Inclusion of Capital Improvements: Landlords might try to pass on the cost of capital improvements (major renovations or upgrades) as operating expenses. These should generally be the landlord's responsibility.

• Lack of Transparency: Vague or unclear expense reports make it hard to verify charges.

• Double Billing: Charging tenants for expenses that are already covered by other tenants or by the landlord.

• Unnecessary Expenses: Inflated management fees or excessive spending on services.
  

How to Protect Yourself

Here are steps you can take to ensure you're not being overcharged:

1. Thoroughly Review Your Lease: Before signing a lease, carefully examine the operating expense clause. Understand what's included, how expenses are calculated, and what rights you have to audit the expenses. Engage a commercial real estate broker to review the lease on your behalf.

2. Request Detailed Expense Reports: Your lease should grant you the right to receive detailed expense reports. Request these reports regularly (typically annually) and scrutinize them carefully. Look for any unusual or unexplained charges.

3. Understand Your Pro-Rata Share: Verify that your pro-rata share is calculated correctly. This is usually based on the square footage of your leased space divided by the total leasable square footage of the building.

4. Audit the Expenses: If you suspect errors or overcharges, consider conducting an audit of the operating expenses. Your lease should outline the process for conducting an audit. You may need to hire a professional commercial real estate auditor.

5. Negotiate Caps on Expenses: During lease negotiations, try to negotiate caps on certain operating expenses, such as management fees or administrative costs. This can provide some protection against excessive spending.

6. Document Everything: Keep detailed records of all communications with your landlord, expense reports, and any discrepancies you find. This documentation will be crucial if you need to dispute any charges.
   

Example: The Case of the Overzealous Landscaper

Let's consider a hypothetical example in Brevard County. Imagine you lease space in a multi-tenant office building in Melbourne. Your lease states that you're responsible for 10% of the building's operating expenses.

You receive your annual expense report and notice a significant increase in landscaping costs. Upon closer inspection, you discover that the landlord has hired a high-end landscaping company that charges exorbitant rates for basic services. Furthermore, the landscaping company is performing services that seem unnecessary, such as weekly flowerbed replacements.

In this scenario, you would:

• Review your lease: Confirm that landscaping is indeed included in operating expenses.

• Request documentation: Ask the landlord for invoices and contracts related to the landscaping services.

• Compare costs: Research the average cost of landscaping services in the Melbourne area to determine if the charges are reasonable.

• Communicate with the landlord: Express your concerns about the high costs and the unnecessary services.

• Negotiate: Attempt to negotiate a reduction in landscaping expenses or request that the landlord seek competitive bids from other landscaping companies.
  

If the landlord is unwilling to address your concerns, you may need to consult with a commercial real estate attorney to explore your legal options.

REACH: Your Commercial Real Estate Partner in Brevard County

Navigating the complexities of commercial leases and operating expenses can be challenging. REACH is committed to helping businesses in Brevard County find the right space and ensure they're not being overcharged. We can assist you with:

• Lease Negotiation: We help you negotiate favorable lease terms, including clear and fair operating expense clauses.

• Expense Analysis: We can review your expense reports and identify discrepancies.

• Market Research: We provide market rate insights for in-county operating expenses.

Don't let inflated operating expenses or landlord overcharging impact your bottom line. Contact REACH today to learn how we can help you protect your business.

Current Listings For Sale

Current Listings For Lease