Commercial Property Tenant Tip: Check Whether CAM Costs Include Insurance

If your owner charges you a pro rata share of the building or shopping center’s insurance costs as part of your annual CAM bill, check whether your lease specifically lists insurance as a CAM cost. If it doesn’t, then you shouldn’t pay for any insurance CAM charges. And if you discover that you’ve been paying unnecessarily for years, you should be able to recover the money.

That’s what a New York tenant did. A lease required the tenant to pay its proportionate share of the center’s CAM costs. The owner billed the tenant for its proportionate share of the center’s insurance premiums, and the tenant had paid these bills for two years without objection. The tenant then sued the owner, asking for a refund of the share of the insurance premiums it had paid and for a court order that it wouldn't have to pay a proportionate share of such insurance premiums in the future. The tenant argued that the insurance premiums weren't a CAM cost and it had paid these bills under protest.

A New York appeals court ruled that the tenant didn’t have to pay its proportionate share of the center’s insurance premiums. The court noted that the lease didn't define CAM costs except to say that they included the annual property taxes. The lease did, however, have an insurance section, which didn't have a provision requiring the tenant to pay a proportionate share of the center's insurance for the common areas--it only held the tenant responsible for the insurance covering its own space [Hook Superx, Inc. v. Ciampa North Co., (12/03)].