The Business Litigation Blog

What Do You Do If Your Landlord Charges You An Exorbitant Common Area Maintenance Fee?

You lease a commercial property in Chicago for a retail business in a shopping center.  You have a 10-year lease that you negotiated with the landlord.  For the last couple of years, you have paid $100,000 a month along with about $10,000 in common area maintenance (CAM) fees.  This month, though, you received a bill for $60,000 for CAM fees.  You have no idea why.  You have enough cash flow to pay the bill, but you had earmarked that money for some new fixtures.  What recourse do you have?

Terms of the Lease

While Illinois has laws that govern commercial leases, the most important thing that controls the terms and conditions of your lease is, of course, your lease.  You negotiated the lease two years ago, so you should know what it says, right?  If you negotiated the lease on your own, you may not even realize what you have negotiated and what you are actually liable for.

Almost every commercial lease contains terms and conditions regarding CAM fees.  The landlord tries to negotiate terms that fits hisinterests and you do the same.  Landlords typically try to negotiate CAM agreements that:

 ●       Cover as much of the property as possible, including the roof of the entire property (even though the property is subdivided), all improvements necessary to ingress and egress the property (no matter how far removed from your parcel) and parking areas that do not even remotely abut your space;

●       Cover as much of the cost of operating the property as possible, including the costs of ownership, maintenance, inspection, repair and improvements;

●       Ensure as many capital improvements as possible are covered, especially those related to compliance with new codes and regulations and upgrades to plant facilities (HVAC, etc.) that tend to promote lower overall utility costs for the shopping center as a whole; and,

●       Maximize the opportunity to collect management fees as well as administrative fees, if possible.

Of course, tenants try to negotiate the opposite.  For every goal of the landlord listed above, there is an equal and opposite argument of why most of those fees should be borne by the landlord.

Another frequent source of conflict that is often negotiated into a lease regarding CAM fees involves how the pro rata share is calculated.  Often, this can be the percentage of the square footage that is leased by a tenant divided by the leasable floor space of the development and the percentage is what is owed by the tenant as a pro rata share of the total CAM fees.  Unfortunately, this is not always the case.  Often, anchor stores receive a discount rate for their square footage wherein, say, only 75% of the leased space counts in the CAM calculation.  This can lead to disproportionate burdens being placed on smaller retailers.

A final lease provision sometimes included allows for an audit of CAM charges within a specified time.  If you want to audit the charges, don’t sleep on your rights or you might be prevented from doing so later. 

So, in the above example, what is the recourse?  The first thing you as the retailer should do is consult the attorney who negotiated the lease on your behalf.  The attorney should be able to quickly ascertain the appropriateness of the charge.  If there was no attorney involved in the negotiation, then you should get representation from an experienced commercial real estate attorney.  This attorney will be able to analyze the lease and the facts surrounding the charge and find out if you are obligated to pay them under the terms of the lease.  If you are not obligated to pay these charges, the same attorney will be able to help you either negotiate a settlement or represent you in court proceedings if they are necessary. 

 The professionals at The Patterson Law Firm have years of experience in analyzing and litigating commercial leases.  If you are having sticker shock at your CAM fees or any other concern regarding your commercial lease in the Chicago area, give us a call at (855) 875-3552 to set up your initial consultation.  Put our decades of experience to work for your business today.

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