Commercial Real Estate Investment/CAM charges raised significantly

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Common Area Clause
Common Area Clause  
QUESTION: Hello,

I am hoping you can help me with my issue. Per my lease I am to pay $50 a month for monthly common area cost. The amendment to the lease states a base rent increase per year for the next 3 yrs and says to pay $50 a month in CAM cost. Underneath it it says that  monthly escrow for taxes and insurance shall be $100. Below that it states expiration date shall be April 1 2016. Starting this year all of a sudden my Cam fee jumped to $701, without notice, February and June it was $551.  My question is that can CAM fees be raised without notice even if the lease states that it expires in 2016?

Also, there is a paragraph number 17 named 'taxes'. It is further divided into personal property taxes, real estate taxes and other governmental changes, substitute and additional taxes, insurance, definitions, monthly installments. The monthly installment section states " if at anytime during the primary term of the lease or any renewal or extensions thereof landlord has reason to believe that at sometime within the immediately succeeding twelve-month period  tenant will owe landlord payment pursuant to one or more of the preceding sections of this paragraph 17 landlord may direct that tenant prepay a pro rata portion of the prospective future payments. " does this clause have anything to do with the increased cam charges? I do pay additional $100 every month for insurance and taxes. as of January 2014, taxes and insurance charges have also gone up.

Any help would be much appreciated.

Many Thanks!

ANSWER: Robyn:

It seems as though you are mixing monthly ($50/mth)and annual fees in your first paragraph, other wise I can only think that your monthly fee for cam on April 1st jumped to $701 per month(?) and then to $551 per month for February and June.  These figures are unclear.  Do you mean that the CAM fee changes nearly every month?  You also mention my "Lease" and then "the amendment".   I assume you know that it is possible that the terms of the amendment revise the Tax and CAM terms of the language of the original lease.

To answer the question at the end of the first paragraph, let me advise you of three (3) related points.

First, the increase or decrease in CAM fees has NOTHING to do with the expiration date of your lease. The two lease terms are unrelated.  

Second, the CAM fees cannot be increased unless your lease contains language that specifically says that the fee can go up if the landlord gives you written notice that the monthly fee has increased.   Usually, in that case, the lease will nearly always provide that the landlord will give you some form of written explanation - usually in an attached accounting statement - that shows what expenses increased that are making the CAM cost increase.   Note that if your lease does not contain such SPECIFIC text that allows your landlord to increase your CAM cost, then the monthly CAM fee cannot increase.

Third, most leases do have some provision for the CAM cost to increase over the lease term given certain procedures and conditions.  Note again however, if your lease does not contain such SPECIFIC increase language, the CAM fee cannot increase.

Regarding the question in the third sentence of your second paragraph; normally CAM charges are a very separate expense matter from escrow payments for real estate taxes.  It is common for landlords to receive advance notice from the government that the real estate taxes for their property will be increased to a specific higher amount in the future - usually for the next tax year.  In such a case, most leases contain language that allow the landlord to increase its charges to the tenants by a ratable amount to cover the cost of the up coming real estate tax increase on the property.

Finally, if your lease expires in April of 2016, you should only be responsible for paying your fair share of the taxes for the partial year 2016 through April only, not your share for the entire year of 2016.

I am not sure that I have all of your Lease and Amendment details that are necessary for me to be more definitive with my response.   Please send me a follow up question or questions if I can be of further help or if you can clarify your information.

Good luck.

-Jim        



---------- FOLLOW-UP ----------

QUESTION: Also, would any other term in the lease replace the term "cam fee/cost" ? Or would it specifically say CAM cost/fee.

Thank you

ANSWER: Robyn:
People have used many expressions to take the place of "cam fee/cost" such as: "Reimburseables", "Common Costs", "Public Area Expense", Maintenance Charges", "Operating Costs" or "Operating Expenses" and many others.   Is there a word in your lease that you suspect is being substituted?

Often a landlord will send along a line item accounting statement that indicates which expenses are responsible for the increased CAM charges.  Have you received anything like this?

- Jim

---------- FOLLOW-UP ----------

QUESTION: Hello,

I have not received anything from the landlord. Tried to reach out to them for past 6 months now but no response. Also, I just wanted to add that my lease doesn't have any provisions for the cam cost to increase over the lease term, nor is there any cap for cam cost in the lease.

I spoke to an attorney who said that I can take this matter to court but it will be of no use.

Thank you for your help.

Answer
Robyn:

I agree with your attorney that legally challenging your landlord regarding flawed CAM charges would be a waste of time.   The cost to litigate the case would far exceed the excessive amount that your landlord may be charging you.  Trust me, I know.   I was involved with many cases of this sort earlier in my career, and I do not believe that anyone ever came out dollars ahead on their case.

Have you actually asked your landlord for a detailed accounting statement in writing?  There is specific case law (The famous PV Properties case litigated by Joseph Gallagher, Esq. of Gill Sippel and Gallagher in Rockville, MD.) known nationally that requires a landlord to furnish a tenant with a detailed accounting to support CAM bills, however, it is expensive to get your attorney to just file a complaint in landlord and Tenant court to force it to give you the accounting.  No harm asking - in writing - for a breakdown of the increase in CAM costs.

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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