Expert: Jim Avancena, CPM - 8/1/2011

Question
Hello,

I have a three year lease in a shopping mall.  I pay $20.00 a square foot for my base rent.  875 sq ft times 20.00 = 17,500.00.  My question is why are my cam fees more than my base rent?  My cam fees are $2798.84 a month, with a base rent of $1458.33 so I pay a total of $4257.17 rent per month.  My cam fees are based on my square footage of 875.  Fees are Common Area Operating Costs and Expenses, Taxes, and Promotional Charge.  The common area is $18.90 a sq ft with annual increases of 5% and taxes $7.78 and promotional $1.00. I can't figure out why my cam is so high.  Is it common for a shopping mall to charge it's tenants such high cam fees that is almost double the base rent?  I am trying to get a  reduction in rent, will I be able to get my cam fees reduced or only the base rent?

Answer
Kendra:

You or your real estate agent must have asked the landlord or its leasing agent how much the CAM charges had been approximately for the recent prior years BEFORE you signed your lease.  What did the landlord indicate had been the average or approximate cost in the three years before your lease started?     Please don't say that you didn't ask that question before you signed your lease.

If you didn't ask the landlord what to expect for CAM costs before you agreed to the lease you made a major mistake.   If however, the landlord or its' agent told you that the approximate CAM costs had been averaging about $10.00 and $11.00 per square foot for each of the prior years before your lease began, you, or your attorney needs to have a serious discussion with the landlord or its' leasing agent about why they misrepresented a material fact about the CAM costs for the property.

It is quite possible that a shopping center or mall will have CAM fees that are the level that yours are.    Some landlords will simply lease their vacant space at $38.90 per square foot to cover the then current rental value for the space plus the current CAM expenses, and then charge the new tenant for only the increase in the CAM costs when and if they go up over $18.90 per square foot each year of the lease.  

You should talk with some of the other tenants leasing space at the retail property and ask them if they are also being charged a similar CAM charge ($18.90 psf) per square foot for CAM fees.  If so, and they say that they were charged a slightly less or similar CAM charge in previous years, you should expect that you are going to have a problem getting the landlord to reduce your CAM or base rent.   

If you find out that other tenants are paying significantly less than the amount that you pay ($18.90 psf) for CAM fees, try determine the reason why.   Is the other tenant perhaps an "anchor tenant" that the landlord gave better economic lease terms in order to make other retail businesses want to lease space at higher rates?   Or did another tenant simply garner a lower CAM charge in their lease negotiations with the landlord?

If you find that you seem to be paying much more in CAM than anyone else, you should discuss the level of CAM charges with your landlord or the managing agent of the retail center and have them review the actual component costs with you that make up the aggregate total of the $18.90 you were assessed.

You may need to discuss your situation with a local attorney that is familiar with landlord/tenant law, and discover what alternatives you have a this point.  It may be that the landlord has billed you incorrectly based on the precise terms of you lease that deal with your CAM charges and the methodology the landlord must follow when it compiles your CAM assessment.

Send me a follow up question if you discover any further significant information regarding your situation.

Good luck,

Jim