Don’t Provide Owner with Parking Lot Fee Windfall

December 10, 2015
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If the building where you lease or are considering leasing space has its own parking facility, more than likely the owner is charging a fee and making money from the operation. But regardless of how profitable the facility is, the owner may still try to pass through to you all of the costs to operate, repair, and maintain the facility.

You shouldn’t subsidize a money-making business for the owner. If the owner does try to pass on the costs, or tries to include a lease provision to do so, you should refuse to pay the extra costs or refuse to sign the lease. Most owners will probably expect you to balk at the idea and will instead ask you to compromise and agree to pay for “unrecovered parking facility costs”—the costs to run the facility that can’t be covered by revenue from the parking fees. For example, if the owner’s total operating expenses for the parking facility in 2014 are $200,000 and it collected only $180,000 in parking fees, the unrecovered amount that the owner will attempt to pass through to you is $20,000 ($200,000 - $180,000).

Carefully look at the lease language. Regardless of the approach, you should resist any requests to pay CAM costs related to the parking facility if the owner charges for parking. If you see either of the following costs listed in the lease’s CAM cost provision, try to have the item omitted:

  • The cost of all repairs to the Parking Facility (including, without limitation, major repairs and all repairs and replacements necessary to observe and comply with any federal or state rules, regulations, or laws relating to the Parking Facility).
  • The costs of repairing, insuring, maintaining, and operating the Parking Facility, but only to the extent such costs exceed any revenue derived from parking fees collected by Landlord for the use of the Parking Facility.

Whether your refusal to pay CAM costs related to the fee-based parking facility will be successful depends largely on your bargaining power. Larger tenants are usually able to avoid these charges. But if you don’t have sufficient bargaining strength and have to pay the parking facility costs, remind the owner that you know your payments are, or will be, subsidizing its parking operation, and attempt to use this as a bargaining chip in another area of your lease.