[CRE]Why CRE Brokers Must Master CAM Calculations & What to do

Common Area Maintenance (CAM) charges are one of the most contested and misunderstood aspects of commercial real estate (CRE) leasing. Yet, they are critical for both landlords and tenants to get right. Miscalculations can result in substantial overpayments, financial disputes, and even legal battles. For brokers, understanding and effectively negotiating CAM charges is not just a value-add—it’s a necessity.

The Problem: Inconsistent and Incorrect CAM Calculations

A recent discussion on Reddit highlighted just how often CAM charges are miscalculated. One commenter, a CFO at a large real estate firm, found that two out of three buildings under contract had CAM miscalculations—one favoring the landlord, the other favoring the tenant. These errors often stem from:

• Clerical errors by property accountants who don’t fully understand lease terms

• Rolled-forward calculations that don’t account for tenant-specific agreements

• Fraudulent allocation methods, such as incorrect denominator values for allocation percentages

• Lack of transparency, where landlords fail to provide tenants with a breakdown of expenses

Why Brokers Must Be Proactive

Brokers play a crucial role in protecting their clients, whether they represent landlords or tenants. A failure to properly understand CAM charges can lead to:

• Tenants overpaying for expenses they shouldn’t be responsible for

• Landlords missing out on recoverable expenses they are entitled to

• Lengthy disputes that erode trust and delay deal closures

• Increased legal exposure for both parties

Actionable Strategies for Brokers

To ensure that CAM calculations are accurate and fair, brokers should adopt the following best practices:

1. Demand Transparency

• Always request a detailed general ledger of expenses.

• Review expense categories to ensure compliance with lease terms.

• Challenge any charges that seem inflated, misclassified, or unsupported.

2. Scrutinize Allocation Methods

• Verify that the denominator used for allocation percentages is correct.

• Check that capital expenditures (CapEx) are not being improperly passed through as operating expenses (OpEx).

• Look for inconsistencies in how expenses are allocated among tenants.

3. Educate Clients on CAM Negotiation

• Advise tenants to negotiate caps on CAM increases.

• Help landlords structure fixed CAM charges where feasible to avoid ongoing disputes.

• Ensure lease agreements clearly define what can and cannot be included in CAM calculations.

4. Advocate for Audits

• Encourage clients to audit CAM charges annually to prevent long-term overpayment.

• Suggest landlords conduct internal audits to recover underreported expenses.

• Leverage audits as a negotiation tool to secure better lease terms.

The Bottom Line

A deep understanding of CAM charges allows brokers to provide exceptional value to their clients, avoid costly disputes, and differentiate themselves in the competitive CRE market. Whether representing landlords or tenants, brokers who take the time to master CAM calculations will not only save their clients money but also build long-term trust and credibility.