CAM Audit Services

CFO Led CAM, Tax & Insurance Audits

Real World Case Study: How a CAM Misstep Cost One Landlord $100,000

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by

Jeff G
in

We often talk about the importance of reviewing Common Area Maintenance (CAM) charges carefully, but there’s nothing more powerful than a real-world example. By popular demand, here’s one of our latest case studies that shows how even well-meaning landlords can make costly mistakes—and how precise lease interpretation and CAM audits can protect both landlords and tenants from unintended consequences.

🏢 The Property

  • Type: Multi-tenant industrial warehouse
  • Size: 100,000 square feet
  • Occupancy: 1 anchor tenant + 5 smaller tenants
  • Lease Structure:
    • All tenants had a 5% annual cap on controllable expenses
    • No cap on non-controllable expenses (e.g., real estate taxes, insurance)
    • Real estate taxes were pegged to a fixed base year; tenants only paid increases above that amount

⚠️ Error #1: Misapplication of the 5% Cap

The first error stemmed from a misinterpretation of lease terms. Instead of separating controllable and non-controllable expenses—as explicitly required in the lease—the landlord lumped all expenses together to calculate the 5% cap.

Why it mattered:

  • That year, non-controllable expenses (real estate taxes and insurance) had actually declined.
  • At the same time, controllable expenses increased beyond the 5% allowable cap.
  • By aggregating all expenses, the landlord mistakenly allowed the savings from taxes and insurance to offset the capped controllable expense growth.
  • The result? Overcharges to tenants and underperformance of the cap mechanism, leading to lease non-compliance and a material loss in recoverable income.

⚠️ Error #2: Misunderstanding the Base Year Tax Structure

The second mistake involved real estate tax pass-throughs. The leases clearly stated that tenants would only share in increases above a fixed base year—no language allowed for downward adjustments if taxes declined.

What went wrong:

  • For two consecutive years, the real estate taxes dropped materially.
  • The landlord, unaware of the base year construct, issued credits to tenants for the difference—even though the leases did not require it.
  • There was no clause obligating retroactive pro-rata reductions; yet the landlord voluntarily reduced revenue by misapplying a catch-up logic that simply didn’t exist.

💸 The Bottom Line: A $100,000 Oversight

When we ran the audit, the combined effect of these two missteps over a two-year period totaled approximately $100,000 in lost revenue to the property. That’s $100,000 that could have gone to NOI—or to tenant satisfaction had the landlord been able to better control what was passed through.

🔍 The Takeaway

This wasn’t a case of bad intent. It was a case of CAM complexity, lease misreading, and a lack of process controls. These types of errors are incredibly common—especially in growing portfolios where internal CAM procedures haven’t caught up with expansion.

For Landlords:

  • Lease compliance is about more than math—it’s about understanding the nuance of what your leases actually say.
  • A regular review of your reconciliation methods can prevent revenue leakage and tenant disputes.

For Tenants:

  • Don’t assume your landlord is applying charges exactly as written. Errors—intentional or not—can be expensive.
  • CAM audits help ensure you only pay what you agreed to, no more, no less.

🧠 Need a Second Set of Eyes?

At CAM Audit Services, we specialize in exactly these types of reviews. Whether you’re a landlord looking to tighten your CAM reconciliation process or a tenant who wants to ensure you’re not overpaying, we can help.

And for tenants, our service is risk-free—you only pay if we find savings.

👉 Let’s talk. Your lease might be costing you more than you think.

Contact me at CamAuditServices@gmail.com

About CAM Audit Services
CAM Audit Services is a passion project founded by a seasoned real estate CFO who also holds CPA and CFA credentials. After reviewing hundreds — if not thousands — of CAM reconciliations over the years, it became clear just how often these calculations are done incorrectly, overlooked, or misapplied. What started as a niche expertise has grown into a mission: to bring order to the chaos, clarity to the numbers, and fairness to tenants and landlords alike.

We specialize in reviewing Common Area Maintenance (CAM), Insurance, and Real Estate Tax pass-throughs — line by line, lease by lease. Whether you’re a tenant looking for transparency or a landlord wanting to ensure accuracy, we’re here to help make sense of it all.

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