Stale Cam Charges on Commercial Building

Phoenix, AZ · Member since 2017 · 3 posts · 0 votes

The owner (or property manager) of large commercial building failed to properly collect CAM charges going back 4 years. The leases typical provide for a yearly reconciliation statement from the Landlord and a re-adjustment of monthly CAM estimates. None of this was done. How far back is it reasonable to allow the owner to seek stale CAM charges?

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Joel OwensBusiness Member
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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
9y
Are you buying the building? I would not allow the owner to collect post closing back CAM fees or money owed them from your tenants. That would put undue stress on your tenants trying to pay you and the former landlord coming after them for back amounts owed.
Sometimes when a seller is owed money they just eat it and you start anew with the tenants. If there is a bunch of deferred maintenance from tenants not paying cam such as walkways, parking lot, roof,etc. seek a credit at closing from the seller to handle these issues.
Even if tenants owe CAM paying big ticket items you generally have to spread out over long periods of time.
Do you have business sales numbers for the tenants ?? They might not even be able to pay rent plus cam. If that is the case you might have to offer a price for the property that reduces base rent so that tenants can pay cam.
Seller will not like all of this but it sounds like their fault for kicking the can down the road and not collecting for 4 years .
No legal advice given.
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Tim Allen
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Phoenix, AZ · Member since 2017 · 3 posts · 0 votes
9y
Actually, this is happening to an acquaintance, it does not involve a purchase. I belive the property manager didnt switch the accounting to a NNN when the new leases were signed. I was asked if I ever heard of this and he needed some advice. the tenants will likely lawyer up. Thanks
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Joel OwensBusiness Member
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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
9y
I new leases are executed they are generally estoppels signed so there are no disagreements with the tenants.
If the tenants signed a lease changing from a gross lease to cam then they should have read and agree before signing. Most tenants have tenant rep attorneys for lease negotiations or renewals.
Something just isn't adding up here. A lease even a new one will generally spell out tenants are to be given a cam estimate budget for the next year on estimated expenses. The landlord then upon request shows tenants the actual expenses for cam etc. with reports. The property manager not charging for cam for years would be gross negligence if it was in the leases.
Property managers generally have ledgers they provide each month for base rent plus cam income and then expenses reporting.
No legal advice given.
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Linda WeygantPro Member
Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
9y
If an annual reconciliation is to be done by the property manager to collect excess amounts and was not done, then the property manager needs to make things right with the owner, not the tenants.
Their leases probably say something that indicates that they will receive the annual billing within XX days after the end of the year or period or whatever and then they have YY days after receiving the bill to pay, or it's rolled into the next annual payments or something like that.
If the annual billing was not provided in those XX days, I don't think contractual law will allow you to go back and provide them with all 4 annual statements, at least 3 of which were not provided within XX dates.
Somebody is eating the money here and my bet is on the property manager from a contractual point of view, but in reality will probably end up being the landlord.
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Ash Patel
Full time investor · Cincinnati, OH · Member since 2013 · 405 posts · 312 votes
9y
First step - Stop the bleeding. I would take each tenant out for drinks/dinner and explain that they have been getting a pass but now its time to enforce the lease and collect cam. Let them know that they won't be back charged CAM but it will be due each month going forward. Go by the exact language in the lease. Your friend probably should find a new line of work.
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Tim Allen
OP
Phoenix, AZ · Member since 2017 · 3 posts · 0 votes
9y
Thanks everyone. It is unusual and because it is not my property, I am a bit in the dark as well. I know they are on their second or third property manager, so it may have been the property manager during the lease negotiations that dropped the ball. It seems that the tenants were billed the same CAM charges (based on the old lease rather than NNN) for the past four years with no changes. No reconciliations or updates estimates were done.
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Milivoje Simonovic
Member since 2026 · 11 posts · 0 votes
3d
This is usually why it gets skipped. Redoing years of numbers for each tenant takes forever so it only happens when it becomes a mess. I built a calculator to keep my numbers current every year so they never get this far behind. It might be worth a look, in the future.
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