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Watch out for 'administrative fees' in common area maintenance charges

Last month we talked about common area maintenance and the wildly fluctuating fees property owners charge tenants in some cases. Fees for CAM, as the name suggests, go toward the maintenance of common areas, like parking lots. A given tenant's CAM costs principally depend on the amount of rented square footage, but the property owner has a lot of discretion in determining CAM costs. In other words, tenants should double-check that they aren't being over-charged.

Example of a CAM Dispute

When you take over a business, be sure to go back and audit the CAM charges.

In a case we handled at Corfield Feld LLP, our client, a national tenant, purchased another national tenant. They went through the old leases to determine what they were responsible for and what the other tenant had been paying. At that point, our client discovered that the property owner had been charging "administrative fees" to the tune of $50K per year.

The prior tenant (the tenant our client bought) had been paying these fees. Our client, the new tenant, would also have to pay these fees, if our client failed to object to them. Fortunately, in the lease was an attorney fees provision, which shifted the legal cost of clearing the issue to the property owner. This meant that taking legal action cost nothing for our client.

The moral of the story is to audit CAM charges and to reconcile the amount you're being charged as a tenant with the provisions of the lease and what those charges are actually going toward - parking lots, for example, rather than "administrative fees."

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