Expert: Jim Avancena, CPM - 10/1/2008

Question
I have a similar question to Cam charges like you answered, however I have a twist. The center I am in is 12K ft and I occupied 4500 of it until my lease ended (today as a matter of fact). I was also being padded with management fees. But here is the twist. My landlord owns 3 properties adjoining, one that is vacant, one that is new (5 years) and the last an older building that he also runs his office out of. 5 other tenants share our building, and several tenants occupy smaller offices in the older one with him, but probably totalling 12K also. I was slapped with the CAM adjust for 2007, and my Cam increased in 2008. Then he is adding the 2008 estimated for my final bill. I have found out that the landlord for the other building charges NO AM fees for those tenants. But we pay the entire costs of the trash service which they also have keys for. His center manager, a direct employee, picks up trash everyday from all three properties, yet we pay for his services, they do not. He pads the CAM with a 600/month management fee, but he is the center manager/owner. The light poles in the back of our building run down the divider between our center lot and the other building lot where they are, and it illuminates their lot as well. But we pay the full electric bill.

I checked other centers around us and CAM was about 2.00 - 3.00 per sq per year. My final "estimate" puts us at about $4.10.

I have asked for a complete audit and he has not responded. I refuse to pay until I see actual invoices. All he has ever given me and the other tenants is a simple spreadsheet that he puts these crazy number in. I figure that is he is getting 1$ per year at least more than he should, then over the course of 5 years (all tenants included) that we are looking at over charges of at least 60K. And if you consider the fact that he is excluding his other 12K of office space from CAM charges, then we would be looking at $120K for all tenants. Other tenants are angry, but some are corporate like NEXTEL, Sprint. Keva Juice, Sprotclips and the nail guy would love to get their CAM reduced or paid back.

What do you think? Is it worth it? Would this qual for a class action? Could I file for all? If not, if I win, could he be forced to pay back the others?

Your help in this matter would be greatly appreciated.

Answer
Robert-

You may not realize what you are getting into - but bravo for having the guts to consider the challenge.

My instincts, like yours, tell me there may very well be fraud involved from what you have described.  Note however, that courts require proof of fraud, not circumstantial evidence.

First, this endeavor could be very expensive, and even if the courts decide that you should be awarded some amount for past overcharges, often that award is not enough to cover your legal fees when this matter is over.

Does your lease state that you have the right to audit your landlords records regarding these charges?   Is there any conditioning language that limits what you can review as part of your audit?   Consider the impact of any language that limits the records that you can audit.   Additionally, the audit language, if your lease has any, may set time limits on when you can do certain things in the audit process - be certain to stay within those time constraints.

You should check with legal counsel in your jurisdiction to discover the law on two matters: 1.) If your lease has no statement whatsoever regarding your right as the tenant to audit, and does that actually deny you the ability to perform the audit anyway - many times it does NOT, 2.) If you are making a claim for fraud, you may not need your lease language to give you the right to audit the landlord's records, you may have it anyway.  Again, I am not an attorney, you must clarify this with an attorney that knows Landlord / Tenant law in your jurisdiction.

The basics of the facts you have provided suggest that you may need to see the books and records of the landlords other properties where he apparently has applied his expense allocations inconsistently from the manner he has utilized for your property.  If possible, it would be best to have an experienced commercial lease auditor or fraud auditor perform the audit for you.  There are many "tricks of the trade".   You may find that the invoices and other contract documents for your property will expose errors and overcharges regarding your property - but they may not.  Often, in an effort to make discovery more difficult, a property owner will have invoices that simply provide a total amount due, without and description of what the invoiced amount covers.  For example, an invoice may say only: "December $1,000", when a invoice should provide more detail such as: " December Trash Service:  "Eight (8) Yard container pick-up three (3) times per week".  You may also be able to discover that additional service information from reviewing each of the service contract documents.  Note also that some contractors will write their invoice as directed by the landlord and stipulate the service or work they performed was provided at your property when they actually did the work - or some of it - at one of the landlords other properties.

The real key to an audit is to be comprehensive in the list of discovery documents you delineate in your discovery request and be certain to indicate you will provide additional discovery requests as necessary as the audit proceeds.

If you believe their are errors contained in your CAM charges you have every right to have the landlord clarify any questions you may have, and show you the related supporting documents.  If the landlord refuses to respond to your requests in this regard (be CERTAIN to send each of your items of correspondence and requests to the landlord via Certified Mail, if you have not done so up to now, re-send the previous critical documents immediately via certified mail) your attorney may advise you to pay the fees that have been assessed by the landlord for CAM charges into the court to be held pending the resolution of your dispute.  I believe this is done to avoid the common landlord claim via a pre-trial motion to a judge that you are not paying the CAM charges because 1.) you do not have the funds, 2.) that you have demanded an audit as a nuisance, and 3.) this is simply a "garden variety" "witch hunt" by an angry tenant to avoid paying his rent.     

Finally, beware of your landlord offering some sort of paltry settlement to avoid an audit if he owes you a significant amount of money.  Try to determine your fair share.

The problem with getting other tenants in your property to join you audit action is that it is nearly impossible to get the entire group of tenants to agree to do anything as a group - especially regarding what they will contribute to the legal expenses or what they will accept as a settlement.  It is an unmanageable situation.  Note also, that many landlords successfully divide and conquer a group of tenants using many techniques that make a group effort chaotic.

Good luck with your efforts to determine your fair share of the CAM costs you are obligated to reimburse your landlord.  The cost of hiring a knowledgeable attorney or auditor may prove to be well worth the cost if it is financially feasible.

-Jim