In a commercial leasing, tenants depend on their landlord for a variety of services including – utilities, parking lot maintenance, landscaping, janitorial and security services, snow removal costs, and maintenance and repair of common areas (elevator, hallway, sidewalks). These fall under operating expenses that landlords recover as CAM expenses from their tenants. While CAM expenses are calculated as per pro-rata share of leasable area by each tenant, accounting for CAM charges is often tedious and complex.
Usually, tenants rely on landlord’s good faith and expertise when it comes to CAM costs and estimates. However, CAM charges have been one of the most contested aspect of commercial leasing. That is largely because, there is no standardized practice or agreement around what accounts for CAM expenses and how they are calculated. Sometimes oversimplification of these charges, result in misleading and erroneous calculations. There are numerous other factors that often lead to miscalculations, discrepancies, and errors. Consequently, tenants find themselves liable to pay a huge amount of money that was unforeseen, leading to contentions and litigations (in some cases).
Outsourcing CAM audit can help address these issue
Timely CAM audit done year-on-year can help tenants evaluate every aspect of CAM calculation including pro rata share, floors, caps, and base amount as well as each item included within the CAM invoice. Auditing allows tenants to identify whether or not CAM expenses are charged and estimated as per the lease terms.
That said, given the complexities of commercial leases and accounting practices, CAM audits are difficult and tedious. It includes gathering every relevant document and bills, analyzing each expense item, and verifying them with the lease terms to ascertain validity. Given the demanding nature of the audit it is important to outsource CAM audit services to certified consultants. Third-party experts bring expertise, industry experience and best practices that can help conduct a thorough and extensive review of CAM charges.
Advantages that tenants can gain from outsourcing CAM audit
Outsourcing CAM audit to professional service providers allows tenants to get access to expert consultants at a fraction of a cost who are well-equipped to provide every CAM related support to the tenants and help resolve any issue. By engaging CAM audit professionals early in the process, tenants can derive following benefits:
- Minimize occupancy costs by identifying billing inaccuracies and discrepancies with the lease terms.
- Determine fair pricing by highlighting unauthorized charges, and hidden/erroneous expenses (if any), and ensuring CAM invoice is in compliance with lease terms for accuracy.
- Help save substantial cost by uncovering recovery opportunities and remediating inaccurate expenses that may have gone unnoticed otherwise.
Besides cost saving a comprehensive CAM expense audit helps tenants effectively negotiate refund and provides a complete audit trail with substantive reporting in case of billing inaccuracies. It also benefits the landlords by minimizing legal and financial risk and expediting dispute resolution.
Find out whether or not your CAM invoice is accurate and ensure you are paying only what you are liable to pay. Talk to us to find out how we can help both tenants and landlords save cost, reduce financial and non-compliance risks, and ensure a better tenant-landlord relationship.
