CAM Audit Uncovered Millions in Savings

A global financial institution’s CAM audit of thousands of its leases reveals millions in savings!

The Situation

The client, a major financial lending institution, operates thousands of offices and banking centers throughout the United States.  LeaseProbe was hired to conduct a CAM audit for the individual leases of each leased space.

The Challenges

The project presented challenges in complexity, size and scope.

The client operates in over 5,000 locations across the country. The lease for each location contained specific, individualized language outlining the Common Area Maintenance fees which can be passed on to the tenant. Due to the complex and varied language in each of the individual leases, the opportunity was ripe for mistakes and errors to go unnoticed by either tenant or landlord in the billing of CAM charges. 

LeaseProbe was selected as the sole entity to implement the CAM audits for the client’s full portfolio of leased space.  Since most leases typically limit a CAM audit to the current year or even just a period of time within the current year (often 60-90 days after the CAM bill is issued), any errors discovered in the CAM audit could only be corrected for that fiscal year, and the future years remaining on the lease.  Thus there was a time-sensitive element to implement as many audits as possible.  Thanks to LeaseProbe’s integrated approach, the company has the scalability to meet the demands of any size project, while still maintaining a high level of service to existing clients.  LeaseProbe maintains a strong infrastructure in place, regardless of the fluctuations of the market, to ensure that it is able to deliver top-notch, timely service regardless of volume of demand.

The Strategy

Over the course of a year, LeaseProbe’s team of experts conducted a thorough audit of the CAM charges in over 1600 leases. LeaseProbe’s team of experienced attorneys and accountants performed a desktop audit and reviewed the tenant's CAM bill and did a thorough analysis of the tenant’s lease. Every common area pass-through expense was identified and verified through diligent lease review. The goal of the comprehensive analysis was to determine which CAM charges were legitimately supported by the most current lease language, and which were expenses were actually the responsibility of the landlord.  Desktop audits often uncover errors that result in significant savings to the tenant.

LeaseProbe was hired to handle the project in November of 2012.  In just over a year, LeaseProbe’s experts conducted 1600 CAM audits, with 1,000 more leases scheduled for audit in the coming year.

The Results

From the 1600 CAM audits completed, LeaseProbe found that the tenant overpaid significantly for CAM in many of its leased spaces.  LeaseProbe uncovered many mistakes in the CAM charges. The individual errors in each lease added up to over
$11 million dollars. LeaseProbe corrected the current mistaken charges and protected the client from future erroneous charges.
Total Savings: $11,123,375.39

Specific Examples:

In one lease, specific language stated that CAM charges for operating expenses were “Intentionally omitted.”  Notwithstanding, the tenant had been charged $2,690.43 in monthly operating expenses.  Under the lease terms, they were not obligated to pay CAM charges at all. Most leases allow for auditing of the previous year only, but the terms of this lease allowed for auditing from the beginning of the contract dating back to 2007.

Retroactive recovery 2007-2013:  $225,996.12
Future savings for the remainder of the lease: $225,996.12

Total:  $451,992.24

In another lease, the lease language provided for Operating Expenses to be capped at 5% over the prior year.   However, the landlord did not apply the cap to the 2011 operating expenses.  The tenant (LP’s client) was charged in excess of the 5% over the prior year.

Current year recovery: $3,998.00
Future savings for the remainder of the lease: $23,988.00

Total: $27,986.00

The lease for another location provided that the tenant’s Pro Rata Share of Operating Expenses be 2.1% of the total.  However, for 2011, the landlord applied a Pro Rata Share of 3.5%, a significantly higher cap which was not permitted according to the lease terms.

Current year recovery: $3,7572.77
Future savings for the remainder of the lease: $13,933.35

Total: $51,506.12

In another lease, the lease language provided for the tenant to pay its Pro Rata Share of real estate taxes for the base tax year. Upon the second renewal of the lease, the base tax year was the 2010/2011 fiscal year. However, the landlord was mistakenly calculated using the original base tax year of the first lease, 1990/91 fiscal year.

Current year recovery: $123,376.41
Future savings for the remainder of the lease: $157,647.63

Total: $281,024.04