Should the management fee be calculated on property taxes?

No. A management fee compensates the landlord for actively managing the property — services like hiring contractors, overseeing maintenance, and handling tenant communications. Property taxes require no management activity. Industry standard is to calculate management fees only on controllable operating expenses. If your lease does not specify the fee base, challenge any calculation that includes taxes or insurance.

What is a reasonable management fee percentage for CAM purposes?

Industry standard ranges from 3-5% of operating expenses. For retail centers, 3-4% is typical. Anything above 5% should be challenged unless your lease explicitly allows a higher rate. More importantly, verify the fee base: a 3% fee applied to all expenses including taxes will generate a higher dollar fee than a 5% fee applied only to controllable expenses.

Should the management fee be calculated on property taxes?

No. A management fee compensates the landlord for actively managing the property — services like hiring contractors, overseeing maintenance, and handling tenant communications. Property taxes require no management activity. Industry standard is to calculate management fees only on controllable operating expenses. If your lease does not specify the fee base, challenge any calculation that includes taxes or insurance.

What is a reasonable management fee percentage for CAM purposes?

Industry standard ranges from 3-5% of operating expenses. For retail centers, 3-4% is typical. Anything above 5% should be challenged unless your lease explicitly allows a higher rate. More importantly, verify the fee base: a 3% fee applied to all expenses including taxes will generate a higher dollar fee than a 5% fee applied only to controllable expenses.

Property Management Fee: CAM Line Item Audit Guide

A fee charged by the landlord or its management company for overseeing day-to-day property operations, typically calculated as a percentage of operating expenses.

Recoverability & Controllability by Lease Type

Lease Type	Recoverable?	Controllable?
NNN	Yes	Yes
Modified Gross	Yes	Yes
Full-Service Gross	No	Yes

Approximate budget share: 10-15% of total CAM pool.

Common Abuse Patterns

The management fee is calculated on grossed-up operating expenses (including property taxes) rather than actual expenses, inflating the fee base. Landlords also charge both a management fee and a separate administrative fee — double-dipping.

Red Flags to Watch

Management fee calculated on total expenses including property taxes and insurance
Fee rate exceeds 4% of operating expenses
Both a "Management Fee" and an "Administrative Fee" or "Overhead Fee" appear simultaneously
Fee is not specified as a percentage in the lease — giving landlord discretion to increase it

Your Right to Dispute

Cap the management fee at 3% of actual controllable operating expenses, explicitly excluding property taxes, insurance, and capital expenditures from the fee base. If the lease specifies a percentage, verify the fee is applied to the correct base. Strike any duplicate administrative fee.

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Related Resources

GlossaryCAM Glossary GlossaryControllable Expenses ResourcesCAM Audit by State ToolsFree CAM Audit Tools

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This page provides general educational information. It is not legal advice and may not reflect the most current law in your state. Consult a licensed attorney for advice specific to your situation.

Lease Type

Recoverable?

Controllable?

NNN

Yes

Modified Gross

Yes

Full-Service Gross

Yes

Red Flags to Watch

Management fee calculated on total expenses including property taxes and insurance

Fee rate exceeds 4% of operating expenses

Both a "Management Fee" and an "Administrative Fee" or "Overhead Fee" appear simultaneously

Fee is not specified as a percentage in the lease — giving landlord discretion to increase it