A fee paid to the company managing a commercial property, typically calculated as a percentage of collected gross rents (usually 3–5%), which landlords often include in operating expense pass-throughs.
Property management fees are a frequently contested component of operating expense pass-throughs. Tenants argue that when the landlord self-manages, the fee is a profit center rather than a true third-party cost. Many sophisticated tenants negotiate exclusions for self-managed buildings or cap the management fee at a market rate. The fee should be limited to the subject property and should not include corporate overhead, leasing commissions, or supervision of capital projects. Lease abstracts should note whether the management fee is capped, whether it applies to the subject property only, and how it is calculated.
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