When running a business, especially a new business or startup, “common area maintenance” is likely not at the top of an entrepreneur’s or CFO’s list of financial concerns. But common area maintenance, or “CAM,” can often be akin to car problems or health issues: an unexpected high bill that seems to come out of the blue, and which may not have been budgeted for. As such, one of the most common – yet often least expected – real estate litigation disputes that arise for business owners in commercial leases relate to CAM charges.
After all, if you have been paying $1,000 a month for CAM charges on top of your already expensive California business rent, getting a $3,000 bill for maintenance charges that you were not prepared for, or which seem like they should be the responsibility of the landlord, or which may seem to benefit other tenants and not you can definitely be a call to arms to fight the bill, in court if need be. Here are three common sources of California CAM litigation that landlords and commercial tenants should be aware of alike.
Ambiguously Defined Common Areas and Provisions
Some components of CAM fees may be obvious and clear as benefitting all tenants as a whole. For example, in a commercial office building, there will be charges related to shared elevators, main entrances and hallways, parking structures, and security and cleaning services. But how about areas of the building that are not accessible to all tenants, e.g. corridors that may only be available to building management or units which are unrented? Or “common areas” which simply were not ever understood as being part of the property, like outdoor areas?
Of course, the commercial lease will be the defining document which should explain what the common areas and what provisions are being made available to all tenants, but ambiguities in the meaning of terms and scope of maintenance may cause disputes.
Inclusion of Unexpected Charges and Fees
It should come as no surprise that the basic bargaining posture between a landlord and tenant with respect to CAM charges is for the landlord to include as much as possible of its expenses within the CAM fees, while the tenant is doing what it can to minimize its liability in this area.
Generally, a landlord has a longer term connection and investment in the property itself, while a tenant is typically a temporary resident, or at least only under contract to lease the property for a matter of years or less. Thus, tenants can become concerned about the inclusion of CAM charges that seem to benefit the property (and hence its owners) itself for the long term – a la a complete renovation of a shopping mall – when a tenant only plans to stay for a few years.
Similarly, tenants may also raise concerns about unexpected charges and fees which seem to duplicate the services already paid for, e.g. a “maintenance fee” on top of all of the fees that are already presumably related to maintenance.
Disputes Over Pro Rata Shares Between Tenants
Finally, one of the most common types of CAM disputes is when one tenant believes it is: 1) unfairly being charged more than its fair share of CAM charges, based on metrics such as square footage or total number of customers; or 2) that certain CAM charges – such as those that might relate only to restaurants or retail businesses – should be borne only by those tenants which actually benefit from them. Again, the lease agreement should control on such issues, but many leases do leave open the possibility of ambiguity which can lead to disputes.
Contact the Real Estate Litigation Attorneys at Wagenseller Law Firm
At Wagenseller Law Firm in downtown Los Angeles, we provide full legal services to individuals and businesses in business and real estate litigation matters. We provide counsel and representation to landlords, developers, commercial tenants, and investors alike. Contact Wagenseller Law Firm today to schedule a consultation to discuss your real estate matter.