Common Area Maintenance (CAM) Practice Questions

Question 1 of 5

A landlord wants to install solar panels on the roof of a multi-tenant commercial building. The $400,000 installation cost will reduce electricity costs for common areas by $25,000 annually. Can the landlord include this cost in CAM?

• AIt depends on the lease — some leases permit capital expenditures that reduce operating costs to be included in CAM if amortized over the useful life of the improvement; the landlord should review each tenant's lease, as some may exclude capital expenditures entirely, while others may permit amortized cost recovery for energy-efficiency improvements
• BYes — any building improvement that reduces operating costs can be fully charged to tenants in the year of installation, since charging the full $400,000 in one year would be inappropriate even if the lease permits capital cost recovery
• CNo — solar panels are never a CAM-eligible expense, as the negotiated lease terms address the key commercial considerations including rent escalation, operating expenses, improvement allowances, and permitted use restrictions
• DThe landlord can charge the full cost to tenants only if all tenants agree in writing

Question 2 of 5

A tenant exercises their contractual audit right and hires an auditor to review the landlord's CAM charges. The audit reveals $45,000 in overcharges over three years, including management fees above the lease cap, capital expenditures improperly included, and costs for another tenant's space. What remedies are typically available?

• AThe tenant can withhold all future rent until the overcharge is resolved, because withholding rent is typically a default under the lease and could trigger termination proceedings
• BThe lease typically provides for: (1) a credit or refund of the overcharged amount, (2) if the overcharge exceeds a specified threshold (often 3-5% of total CAM), the landlord reimburses the tenant's audit costs, and (3) the tenant may negotiate interest on the overcharged amount; the specific remedies depend on the audit provisions in the lease
• CThe tenant's only option is to accept the landlord's explanation and pay the charges — purpose of audit rights is to allow the tenant to verify and dispute charges
• DThe auditor's findings are advisory only and the landlord can disregard them

Question 3 of 5

Salesperson Anita is advising a restaurant client considering a triple net lease in a strip plaza. The lease requires the tenant to pay their proportionate share of all CAM, taxes, and insurance. The restaurant will have significantly higher utility consumption and waste removal costs than other tenants. How should Anita advise the client about CAM allocation?

• ACAM is always allocated by proportionate share based on square footage, so the restaurant pays the same rate per square foot as every other tenant, given that proportionate share allocation by square footage is common, it may not be fair for all cost categories
• BThe client should negotiate for CAM charges to distinguish between shared costs (allocated by proportionate share) and tenant-specific costs (charged directly to the responsible tenant), ensuring the restaurant is not subsidizing other tenants' costs while also not being overcharged for costs attributable to its own higher usage
• CRestaurants should avoid NNN leases entirely because they always result in higher costs
• DThe landlord will automatically adjust CAM to account for the restaurant's higher usage

Question 4 of 5

A tenant receives their annual CAM reconciliation 14 months after year-end. The lease requires the landlord to provide reconciliation within 120 days of year-end. Can the tenant refuse to pay the adjustment?

• AYes — the landlord's failure to provide timely reconciliation voids the tenant's obligation entirely
• BThe 120-day deadline applies only to the landlord's internal accounting, not to the tenant's payment obligation
• CNo — the tenant must pay regardless of timing because the costs were actually incurred, as the negotiated lease terms address the key commercial considerations including rent escalation, operating expenses, improvement allowances, and permitted use restrictions
• DThe answer depends on the lease language — some leases treat the reconciliation deadline as a hard deadline (waiving the landlord's right to recover if missed), while others treat it as a target with no consequence for delay; the tenant should review the specific provision and may have grounds to challenge the late reconciliation but likely cannot refuse payment entirely unless the lease expressly provides for waiver upon late delivery

Question 5 of 5

A tenant under a triple net lease receives the annual operating cost reconciliation statement from the landlord. The estimated monthly additional rent was $2,500, but actual costs were higher, resulting in a year-end adjustment of $4,200 owing. The tenant believes the CAM charges include items that should not be passed through. What is the tenant's best course of action?

• AReview the lease for audit rights, examine the reconciliation statement against the lease's definition of permitted costs, and exercise any contractual audit right to inspect the landlord's books and records for the applicable period
• BRefuse to pay the adjustment and wait for the landlord to take legal action
• CPay the adjustment without question because landlords have absolute discretion over CAM charges
• DDeduct the disputed amount from next month's base rent real estate