🇺🇸United States

Padding of CAM/opex pools and misclassification of expenses

3 verified sources

Definition

Tenant‑advocacy white papers describe repeated findings where landlords include ownership costs, capital improvements, or unrelated corporate overhead in recoverable CAM/opex pools, beyond what leases allow. While sometimes attributable to error, the pattern of systematic, tenant‑unfavorable inclusions across portfolios indicates gray‑area practices that benefit landlords at tenants’ expense until challenged.

Key Findings

  • Financial Impact: Tenant audits cited in advisory materials often recover 5–15% of annual CAM/opex charges as ineligible; for a tenant paying $300k in annual recoveries, this equates to $15k–$45k per year, and proportionally more for large anchors or multi‑site portfolios.
  • Frequency: Annually (embedded in each reconciliation cycle until discovered and corrected)
  • Root Cause: Weak internal controls on expense coding; incentives to maximize recoveries; and lack of independent review against lease language before including expenses in tenant pass‑throughs.

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Leasing Non-residential Real Estate.

Affected Stakeholders

Landlord CFO/finance, Property accountant, Property manager, Tenant corporate real estate and finance (as victims)

Deep Analysis (Premium)

Financial Impact

$10,000–$100,000+ annually per lease (federal/state government leases often large; 5-15% CAM recovery potential on $200k–$1M annual CAM = $10k–$150k missed credits or overpayments); institutional loss compounded across 50-200+ leases per agency • $10,000–$50,000 per agency per year; systemic across agency portfolios (10–50 leases per major agency = $100k–$2.5M portfolio exposure) • $100,000-$300,000 annually (5-15% recovery × $2M-$4M typical manufacturing/warehouse CAM across multi-facility operations); disproportionate impact due to large footprints

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Current Workarounds

Accounting coordinator or facilities finance manager receives reconciliation, manually compares to property-level lease files, cross-references with site-level facility invoices (utilities, janitorial, HVAC maintenance, dock repairs) stored in disconnected systems; communicates discrepancies via email or phone to landlord/broker; Maintenance Coordinator at each site reports facility issues and cost metrics through work order system (e.g., Maximo, UpKeep) or paper logs, unconnected from corporate accounting reconciliation; no visibility into whether site-level actuals reported by Maintenance Coordinator are being accurately reflected in CAM invoices • Accounts Receivable Specialist for medical/dental practice processes CAM/opex reconciliation payments and credits based on landlord statement; no validation of charges against lease terms (lack of expertise and time); spreadsheet tracks payments by location but does not flag inconsistencies; may flag invoice discrepancies (math errors) but not lease compliance issues (e.g., improper expense categorization) • AR specialist or accounting coordinator maintains paper reconciliation folder per site, manually tallies expenses from vendor invoices, calls landlord/property management to request supporting documentation (often delayed), reconstructs CAM allocation across facilities using outdated spreadsheets shared via email and OneDrive

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

Systematic under‑recovery of operating expenses from tenants

Cresa white paper examples show individual office tenants recovering six figures in overcharges per building; scaled across a multi‑property portfolio, under‑recovery or forced credits commonly reach hundreds of thousands to millions of dollars annually.

Delayed or missed billing of year‑end opex shortfalls

$50k–$250k of unbilled or written‑off prior‑year recoveries per large building is commonly cited by tenant‑rep and audit firms; across a regional portfolio this can easily exceed $1M per year in lost or deferred recoveries.

Over-spend on shared services due to weak expense visibility between estimates and actuals

Vendor and service overspend of 3–10% of controllable operating expenses per year is commonly flagged in commercial real estate benchmarking and reconciliation guidance, equating to tens to hundreds of thousands of dollars per large building annually.

Tenant refunds and concessions due to incorrect opex/CAM billing

Cresa and similar tenant‑advocacy audits often recover from tens of thousands up to several hundred thousand dollars per tenant over multi‑year periods; for landlords this manifests as unplanned credits/refunds and legal/audit fees of similar magnitude.

Extended cash collection cycle from late and disputed opex reconciliations

For a 300k–500k sq. ft. multi‑tenant building, opex true‑up receivables can easily reach $200k–$500k annually; disputes delaying collection by 60–180 days impose material working capital costs and, in some cases, partial write‑offs.

Accounting and property staff capacity consumed by manual reconciliations

Portfolio operators report dedicating multiple FTE-months annually to manual reconciliations for mid‑sized portfolios; at fully loaded costs of $80k–$120k per accounting FTE, the effective capacity loss often exceeds $100k–$300k per year.

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