Expert: Jim Avancena, CPM - 4/29/2011

Question
My additional rent reconciliation letter from my PM this year states that they have been undercharging me by nearly 40% on CAM's for 2010.  The reconciliation letter shows my proportionate share of the overall charges are 1.03%.  According to my lease, my proportionate share should be .26% (1305 SF/501,000 SF), with a maximum increase of 20% due to vacancy.  The PM has stated that the reason for the 400% increase in proportionate share is due to the vacancy rate, which is 11% for the shopping center.  I have also been told that they have split the shopping center into "CAM pools", which is not mentioned in the lease, and that is another reason for the inflated share.  The only mention of proportionate share in my lease is the .26%, and the only mention of the shopping center is the 501K SF.  Are they allowed to break the center into smaller groups for CAM charges?  They've canceled an appointment to meet, and I will need to send a dispute letter in the next few days or, according to the lease, the estimated CAM charges will be considered true and payable.  Should I send the letter myself, or have an attorney do it?

Answer
Joe:

I am not an attorney, and cannot practice law, however, from what you have indicated in your question, I believe that you should have an attorney knowledgeable about Landlord/Tenant law review your lease immediately and prepare an appropriate response to your landlord.   Note that your lease likely stipulates several specific terms about the correspondence you will be sending to your landlord "disputing" its' rent reconciliation letter in order for your correspondence to be binding; that is for your correspondence to have the effect that you need it to have.

Commonly a lease will stipulate that your correspondence disputing the CAM charges must contain specific information, for example, stating in detail the SPECIFIC charges that your are questioning, specifically why you are challenging the charges, etc. or a large collection of other types of possible information, in order for your correspondence to be accepted by the landlord.   It is not uncommon for a lease to specify that the tenant shall be required to provide specifics that the landlord knows the tenant would not have without first having an opportunity to audit the landlords books and records.   This kind of difficulty is why you must retain an attorney that is very knowledgeable about landlord/tenant law and is already expert enough to know how to handle the problems that you encounter.

If you used an attorney to review the lease you describe in your question, do not use that attorney again because that attorney should have advised you not to agree to one or many of the terms that you have described as being contained in your lease.  The lease provisions that you indicate about adjustments that the landlord is allowed to make in your CAM charges for vacancy levels at the property are potentially devastating to a tenant.  Your pro-rate share, especially your calculations, should also be reviewed.    

"CAM POOLS" can be a reasonable and fair way of placing expenses into groups in order to equitably allocate expenses to certain groups of tenants.   CAM POOLS can also be a means of over-charging tenants if the underlying reasons for the allocation of the costs are made to overcharge tenants.  Often a landlord can describe the rationale for its allocation of the costs and the explanation will be so complicated or filled with industry buzz words that a tenant won't even know that what was articulated was bogus.   The point is that you need to have the landlord detail the reasons for establishing the CAM POOLS and to allow you, your attorney, or better yet, a lease auditor, to review the underlying supporting documents.

You may also find it helpful to check with other tenants at the property to see if they have the same provisions as you do in their lease and if they have been assessed for CAM costs in a similar fashion.

The specifics you have noted about your lease suggest that your landlord may be abusing its' ability to assess you for CAM expenses in order to use the property CAM costs as a profit center that exceeds simply recovering its actual CAM expenditures.    

Good luck,

Jim