Routine Maintenance Expense

Routine maintenance expense describes recurring, low-dollar work required to keep a commercial property operational and in leasable condition, such as janitorial services, minor repairs, landscaping, HVAC filter changes, and small plumbing fixes. In CRE lending, these costs are reported as operating expenses and are separated from capital expenditures. Lenders and underwriters review historical routine maintenance to normalize expenses, assess reserve adequacy, and determine sustainable net operating income, since understating these regular costs can inflate projected cash flow and misstate borrower coverage ratios.

When preparing underwriting models or responding to a lender’s due diligence requests, treat routine maintenance expense as a recurring line item in the property’s operating statement and future budgets. Use historical three- to five-year averages, adjusted for known service contract changes, seasonal patterns, or tenant turnover to create conservative projections. Lenders will compare your budgeted routine maintenance to historical spending and market norms to judge whether reserves and the proposed debt service coverage ratio are realistic. Properly classifying these costs prevents double-counting with capital reserves and ensures transparent cash flow for loan sizing.

Routine maintenance expense directly affects net operating income stability and the borrower’s ability to service debt. Underwriting that ignores or understates these recurring costs risks overstating available cash flow, which can lead to loan covenant breaches or insufficient operating reserves during downturns. Lenders use consistent treatment of routine maintenance to normalize comparables across properties and to set realistic debt service coverage and reserve requirements. For sponsors, accurate forecasting of routine maintenance supports effective asset management, reduces tenant complaints, and preserves property value by preventing deferred maintenance that can trigger larger capital expenditures.