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Question
I am in the midst of a lawsuit against a prior shopping center landlord for overcharging of CAM, insurance and property taxes. Surprise. Surprise. My lease was set up specifically with CAM expenses, insurance and property taxes as a percentage of gross leasable area. One part of the dispute is that the anchor tenant paid the majority of the property tax, but the landlord included in my tax calculation that expense, when the landlord did not pay the expense. If an anchor tenant pays a portion of the tax expense directly to the county office, can the landlord try to expense the portion to me that the landlord did not pay? I thought true and actual expenses paid by an entity are recoverable. How can the landlord be reimbursed for an expense that the landlord didn't pay?
Angela-
I have fought the specific battle you describe many times.
Several things need to be addressed to succeed in your dispute.
First; billing to create a profit cannot be considered reimbursement of an expense. You cannot bill a tenant for expenses that you have already collected, they are no longer your expense.
Second; there are several appeals court decisions that stipulate that a landlord cannot collect more than 100% of his expenses from his tenants. I am certain that your attorney will find them in the Nexis/Lexis or whatever the case law on-line service is called.
Third: There is one recognized expert on this matter and related tenant reimbursement issues; Joseph Gallagher Esq. in Rockville, MD., with the law firm of Gill, Sippel & Gallagher (301-251-9200).
Joe litigated what is now one of the true gems of decisions in Landlord/Tenant law regarding the "Fiduciary Duty" owed by a landlord to his tenants. It can be found in the Maryland Court of Appeals Decisions in Maryland; known as the "PV Properties" case about fifteen (15) years ago. A landlord that attempts to deceive the tenant about what he has paid or that an expense has already been paid, it sounds as if the Fiduciary Duty issue comes in play. Your counsel may wish to talk with Mr. Gallagher; although the PV Properties case deals primarily with landlords attempting to withhold access by the tenants to the landlords supporting documentation that verifies the basis of the operating expense charges, Mr. Gallagher has dealt with a wide range of reimbursement related legal matters.
Many landlords attempt to collect for expenses they did not pay. They also try to have tenants reimburse them for the penalties they later are assessed for not paying bills on time.
Please have your attorney contact Mr. Gallagher if you are involved in a legal action over this matter.
Good luck.
-Jim
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Answers by Expert:
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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