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Controllable Expenses

By on November 18, 2018

Controllable expenses are expense items that the tenant or landlord has a high level of control over, unlike uncontrollable expenses which are somewhat similar to fixed expenses.

For example, utility bills and manpower costs can be controlled to a high degree if a business keep tabs on electricity usage and don’t hire excessive staff.

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On the contrary, rental and property taxes are things that a business has little control over.

While controllable expenses can seem similar to variable expenses, they are slightly different in definition.

Variable expenses concerns cost items that increase with more usage or output. Whereas it is possible for controllable expense items to produce more output with the same amount of inputs.

The topic of controllable expenses can be a area of negotiation when it’s time for a lease to renew.

Tenant would undoubtedly prefer an expense cap on the total expenses for upkeeping the property. And landlords would prefer that such caps (if any) are only placed on controllable expense items.



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