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Commercial Real Estate Investment/Back charges for CAM and Real Estate

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Expert: - 10/3/2008


Question
I recently sold my business and had the last year of the lease assigned to the new owner. Everything seemed fine and then I received a letter from my landlord asking for almost $10K in real estate and CAM charges for the last 3 years. After reviewing the lease, it says that those extra CAM charges and real estate taxes are supposed to be reconciled per 12 month term. We renewed in March and our landlord still said nothing about all this money we supposedly owed. Had I known, I would have factored that into the price of my business. Am I still responsible for all of this money? Or is their horrible book keeping and failure to reconcile in timely manner (the lease states every 12-month term) somehow a breech of contract. Please let me know what you think. I sincerely appreciate your time.

Answer
Dana-

This is a legal matter.  I would be very angry about this.

I have been involved with clients in the identical situation many times, and in each case, the outcome of the dispute was decided by local court precedents in similar cases.   Sometimes the judge has ruled that the Landlord waived his right to back charge you because of the time delay, and other times the judge has ruled that you are still responsible for the belated CAM charges.   Check the text of your lease carefully, word by word, for any language that may be of help or hurt your situation.

Just for fun, check with the appropriate real estate tax office and find out if the landlord did not pay his taxes for a few years on the property and then suddenly brought his account current after being delinquent with with a payment covering the last three years.  This might be a reason the the odd billing process.   The judge might not accept that as a valid reason for billing you in arrears, and you may wish to assure yourself that the charges do not contain any delinquency charges that are being passed-thru to you.

You should find an attorney that specializes in Landlord/Tenant ("L&T") law practice.   I would ONLY RELY on your own legal counsel in this regard, do not be influenced by what other tenants or the landlords own attorney or staff tell you.

Good luck.

-Jim

Commercial Real Estate Investment

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Jim Avancena, CPM

Expertise

Best qualified to answer questions that involve commercial leases, that is, basic issues as well as the often unexpected effects of the complexities and inter-relationships of the provisions a lease may contain, explain how seemingly innocuous text in your lease can have a major impact on a Tenant or Landlord and their business operations, and the common practices utilized in the industry. I can untangle most matters that may come up from the time a tenant begins searching for a office or store space and the lease acquisition process, concerns related to remodeling/improving the leased premises, moving-in, subletting or assigning the leased space, and a long list of problems that may come up during the lease term and even after a tenant moves out. I have practical experience with most property management issues and resolving landlord and tenant disputes - especially those involving what may appear to be overcharges assessed for additional lease charges like CAM costs, operating expense reimbursement, real estate taxes, utilities, construction improvements etc. Note that I am not an attorney and cannot provide legal advice.

Experience

Thirty years active experience in the commercial real estate industry as a licensed real estate broker in the Washington DC Metro area (DC, Northern Virginia & Maryland). I have been admitted (approved) by the Maryland and DC courts to testify as an expert witness on the subjects of Commercial Leasing and Property Management in the area of standard industry practices. I have had a business for the last 14 years advising virtually every form of business entity from large national corporations to the smallest ma & pa new businesses regarding a wide range of commercial real estate matters in addition to property management and commercial leasing.

Organizations
Currently my three children keep me so busy that it is difficult to participate in organizations with continuing and specific time requirements.

Publications
I publish a local commercial real estate newsletter titled: "Tenants First". My firm was the subject of a high profile Washington Post business section cover page (2.25 full pages) feature story on January 13, 1993; titled "Overcharging Overhead".

Education/Credentials
BA in Political Science from Memphis University, and five years of study in the real estate development summer program at MIT. I was certified as a commercial property manager (CPM-IREM), and currently hold a brokers license in Maryland and the District of Columbia.

Awards and Honors
The same plaques and honors that most others in my industry have earned. I have none that I consider especially meaningful.

Past/Present Clients
Past clients include: The World Bank, George Washington University, National Association of Criminal Defense Attorneys, US Department of Commerce, The American Benefits Council, K-Mart Development, many law firms, a national union, other major organizations, and many, many small business firms and retail operators that I am most honored to serve. I estimate more than 1,500 firms/organizations.

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