Cam Charges Cause Headaches For Small Business Owners Making Education And Legislation A Concern

Jan. 4, 2008 - PRLog -- Santa Clarita, CA—Soon, it will be that time again for commercial tenants to begin receiving their statements for Common Area Maintenance (CAM) charges.  Unfortunately, CAM overcharges are a major problem for commercial tenants.  This makes education and legislation an increasing concern to the Santa Clarita small business owner.

CAM overcharges have become a major concern amongst commercial tenants in the Santa Clarita Valley.  CAM charges have become such a hot button issue, the City of Santa Clarita stepped up.  The City presented a workshop for Small Business Owners on April 19, 2007 to educate business owners on how to protect themselves when entering into lease agreements and other issues relevant to business owners.  

Chris Jacobsen, an attorney for Poole and Shaffery, deals with real property matters between landlords and tenants.  An expert in lease agreements, he was a presenter at the workshop sponsored by the City of Santa Clarita and advised attendees to “Make sure the lease fits your needs, count all costs, and review the history of the building’s CAM charges for prior years. Assure that only "legitimate" CAM charges are included in the CAM provision, and items such as capital improvements and compliance with laws are excluded.  Do not accept a provision that makes the landlord’s determination of CAM charges final—reserve the right to audit the landlord’s expenses and to review the landlord’s calculations. Do not accept CAM expenses that are the landlord’s obligation under other provisions of the lease.”

Many leases have a provision that makes the landlord’s determination of CAM charges final.  Since the landlord is basically spending the tenant's money, the landlord should be accountable to the tenant for those expenses.  A tenant should have the right to audit the landlord’s expenses and to review the landlord’s calculations before paying these charges.

Frank Holladay, owner of several commercial holdings throughout California opines, "The CAM expenses are basically the tenants' money towards common area expenses.  Since it is the tenants' money, they should be able to audit the actual records.  Any landlord with nothing to hide should allow the tenant to audit the records.  After all, it is the tenant's money being spent.  If there is a CAM charge passed through to the tenants, all of our tenants, whether the audit right is stated or not, have had the right to audit their records.  There has been no significant hardship on us to supply the source records for the CAM and it would be hard to believe there would be any significant hardship on any other landlord.  We have found when you have this kind of transparency, it makes the relationship stronger between us and our tenants."

The summary statement, which is commonly used by many landlords, is not sufficient to know if a charge is legitimate or not.  Without access to the source records, to be able to compare to the annual statement, the statement really has no meaning or legitimacy.  

Tim Crissman, Crissman Commercial Services, has been involved in commercial and industrial services for over 23 years.  A property manager as well as a landlord with the majority of his properties located within Santa Clarita.  He has gone on public record stating that when requested, even if the lease has no audit language, when tenants' have questioned the CAM statement, the landlords have allowed the audits.

The source records should be in one location and shouldn't take that long for a semi-experienced person to audit.   No one wants to be cheated and a landlord not willing to allow an audit to the CAM statement probably has something to hide.  

Cyberlease LLC, a national commercial real estate lease audit firm established in 1990 is dedicated to empowering tenants to verify, and when appropriate, challenge their landlord's rental billings, including Common Area Maintenance charges.  Tony Barger, Owner stated that CAM overcharges are very common; and sites the following example “A Fortune 100 insurance company based in the Los Angeles area retained our firm to review its lease and reconciliation’s. Since it no longer occupied the space, it wanted to execute a buy-out of the lease. The landlord was not interested in a buy-out. We recommended an audit and proceeded to review four years of the landlord's records. We discovered that the landlord had never implemented any of the operating expense exclusions in the lease. The results of our audit determined our client was overcharged $3,200,000. This amount was used to provide leverage that enabled the tenant to buy-out of its lease at an exceptional discount over the present value of the remaining payments.“

The Small Business Development Center (SBDC) hosted by College of the Canyons helps prospective and existing small business owners in northern Los Angeles County start, retain or expand their businesses. The SBDC was also a presenter at the workshop hosted by The City and works to educate small business owners on issues that relate to them.  Under the direction of Paul De La Cerda, the SBDC seeks to give small businesses a voice in our local communities. They work to remove barriers to entrepreneurial growth by conducting business development consulting and training and helping small businesses contribute to the economy. They work to educate small business owners prior to signing a lease so that they know how to protect themselves.  The SBDC would like to see legislation that protects the small business owner against CAM charge misuse.  “After hearing from the Small Business Development Center and impacted small business’s, I have directed my staff to research what action should be taken, if any, at the legislative level.” Cameron Smyth, Assemblyman, 38th District.

"It is most appropriate to see legislation being initiated to provide equal access to due process in landlord/renter negotiation deliberations; this legislation would definitely put landlord/renter negotiation on a level playing field," states Larry Mankin, CEO, SCV Chamber of Commerce.

Until there is legislation to protect the small business owner against CAM overcharges, it is important for small business owners to educate themselves.

To learn more about this and other issues relating to small business owners, please contact The Small Business Development Center, 661/294-9375.

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