Commercial Real Estate Investment/CAM fees

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Expert: - 1/8/2010


Question
I signed a 5 year lease with the owner of a multiple story medical office building in 2005. Since that time the building was sold to another group and a new management company took over. When the new management company took over my CAM fees (which were roughly $7800 a year for a total sq. footage of 2020) raised to $13,000. I argued with the new company to try to figure out where the huge raise came from.After going around and around the majority came from a few sources (property taxes, Accounting fees, management fees and administrative fees). After some arguing with the company they lowered the rates slightly. Today I received the estimated 2010 CAM fees. There is a 28% increase in the amount of CAM from calculated rates for 2009 and estimated rates for 2010. Since I signed my original lease my CAM has risen 230% from $7800 to over $17,000 for the coming year.

Is this normal? Is there something I can do to fight the management company on these fees. I feel that they are using the fees to make up for empty spaces within the building.

Answer
Jason-
Landlords are in this business to make money and they know the nuances of a lease better than a majority of tenants.  You may very well be paying excessively for your CAM charges.   However, unless your lease gives you the clear right to audit the landlord's books to see the bookkeeping records and bills that support these increased charges, a lawsuit to force the landlord to give you access to its books and records will cost you much more than the $10,000 in increased expenses that you have incurred since you signed your lease.

Perhaps you have a landlord with a conscience.  Ask your landlord tomorrow if he will be forth coming and simply give you complete access to his original supporting bookkeeping records and allow you to verify the basis of its charges.  Don't hold your breath waiting for the landlord to agree.  It won't happen.

The next time you negotiate your lease, hire an experienced broker that would have warned you about the hidden expenses and risks in commercial leases.   If you had a broker advising your firm when you acquired your current lease, tell him you want him to donate his commission toward paying your CAM fees because your broker didn't bring this particular trap to your attention before you executed your lease.   My guess it that you negotiated your lease without hiring a broker.

Better luck next time.

-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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