Administrative Fee

An administrative fee is a percentage added to recoverable operating expenses, compensating the landlord for the cost of managing the property and administering recoveries. It is often 3% to 5% of the expenses it applies to, and some retail leases set it higher, up to about 15%.

Where it sits in the waterfall

The administrative fee is applied to the pool after exclusions and gross-up, and before the tenant’s share:

1. Pool actuals
2. Less exclusions
3. Gross-up
4. Administrative fee
5. Tenant share

Pool after gross-up    $388,125
Admin fee at 4%         $15,525
Pool with fee          $403,650

What it applies to

This is where leases differ most, and where assumptions cause errors:

• CAM only, excluding taxes and insurance, is the most common tenant-negotiated position
• All recoverable expenses, including taxes and insurance, favors the landlord
• Excluding specific costs, such as utilities or the management fee itself, prevents a fee on a fee

Some leases also cap the fee as a dollar amount or tie it to a percentage of rent rather than expenses.

Management fee vs. administrative fee

A property management fee paid to a third-party manager may itself be a recoverable expense. If the lease also allows an administrative fee on top, the tenant can end up paying twice for the same management. Many leases allow one or the other, not both.

Caps

Whether the administrative fee counts toward a CAM cap depends on the lease. If the cap applies to controllable expenses, the fee on those expenses is usually inside the cap.

The CAM reconciliation guide shows where the fee sits in the full calculation.