Avoid CAM Cost Surprises After Lease Signing

June 11, 2014
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Before you sign a lease for any space in an office building or shopping center, you should know all of the costs that make up the CAM costs and operating expenses for that building or center—and how much of those costs you’ll be responsible for. Without that knowledge, you can’t make an informed decision about whether leasing the proposed space will make sense for you financially.

You can avoid getting an unpleasant surprise when you get your additional rent bill by talking with the owner during negotiations to nail down these costs. There are several documents relating to office building and shopping center CAM costs and other operating expenses that can show you whether additional rent will end up wreaking havoc on your cash flow when it’s too late—after you’ve signed a lease. If you ask the owner why it didn’t disclose those costs to you when you negotiated the lease, the owner may simply respond: “Because you didn’t ask about them.” So try to get and review the following five types of key documents before you proceed with lease negotiations:

·         Expense schedule

·         Historical operating expense/CAM cost data

·         Accounting of base year expenses

·         Utility and tax bills

·         Insurance policies

For details about what to look for in these documents, and for eight key questions to ask during negotiations to tease out the information you need, see “Nail Down CAM Costs and Operating Expenses During Lease Negotiations,” available here.