When you lease commercial space, you pay for more than just the square footage you will occupy. Many, if not most, commercial leases are “triple net” (NNN) leases which require the tenant to pay for or contribute to property taxes, insurance costs, management fees, and operating costs for the entire facility. These additional charges are otherwise known as “Common Area Maintenance” (CAM) charges. CAM charges are allocated to tenants on a pro-rata basis – meaning, the more square footage a tenant occupies, the greater percentage of CAM expenses the tenant must pay.
These costs are calculated by the landlord and because the landlord has exclusive access and control over the books and records relied upon to generate a tenant’s CAM costs, tenants must rely on the competence and good faith of the landlord to generate an accurate calculation. Now, don’t get us wrong here. There are many landlord’s out there that truly care about their tenants and are meticulous in their accounting to-and billing of-tenants for those expenses. This is good business. Highly regarded landlords attract tenants to their properties based on their integrity and sound management practices. Then, there are other landlords, that are simply greedy and don’t care much about the tenant’s interest.
The question, then, is how can tenants confirm the costs ultimately paid represent the CAM charges they agreed to pay? The answer: a CAM audit.
What Are the Benefits of a CAM Audit?
Intentional or not, errors may occur in calculating and billing pass-through expenses. Tenants often underestimate the value of a CAM audit, but this is an important tool for tenants that should not be overlooked. The primary purpose of a CAM audit is to ensure that the tenant is not being overbilled and that the bill is fair pursuant to the terms of the lease.
Benefits of a CAM audit may include:
- Finding errors in billing calculations
- Revealing inaccurate billing procedures
- Determining if expenses are properly allocated
- Assessing whether any improper expenses are included
A CAM audit provides a comprehensive analysis of all fees to determine whether the expenses being charged to the tenant are appropriate or need to be challenged. While tenants could simply rely on the competence and good faith of the landlord to generate accurate calculations, why wouldn’t they verify the validity of these charges? A tenant may find no errors or miscalculations at all, however, with this type of audit, a tenant can be sure that they are being charged just as they should be – accurately, fairly, and according to their lease.
