landlord wants to collect arguably stale CAM charges
Although I am a lawyer and I am on lawyer subs, this seems to be the best sub for my question. My client/tenant has a beer/wine/deli that's done just fine during COVID so the pandemic is not an issue. However, landlord just hit him with a CAM charge reconciliation report from 2019. Landlord wants $9,300 in CAM reconciliation money from 2019. The lease says a CAM reconciliation report will be sent ***approximately***  120 days after the end of the calendar year. Awfully vague language I know, but I did not negotiate it. Anyway, Landlord is demanding the money 14 months after the calendar year ended. The law on this matter is not clear in my state (Maryland) and it is not big enough to go to litigation over. What are others' experiences with this issue? Landlord is multi billion dollar institution with local staff who seem to mismanage a fairly large building.
[{"id": "gpf3evz", "text": "Is this in addition to CAM paid in Q1 of 2020 for the 2019 rec? How are they justifying the year long delay?\n\nAlso, what is the plan for the Tenant? How much term is left? Do they want to stay at that location?", "replies": [], "depth": 1}, {"id": "gpf3lot", "text": "Did they already get one for 2019? Are the 2019 CAM charges in line with prior years and it's just late? Has ownership of the landlord changed recently?", "replies": [], "depth": 1}, {"id": "gpf4hgo", "text": "in situations like this where it isn't totally clear how to proceed, i try to assess the overall context of the lease and the relationship w/ the landlord. not just look at who is right or wrong in this specific instance (arguably stale CAM charges).\n\nE.g., - how much time is left on the lease. are there other provisions where there is some discretion on the part of the landlord that could negatively impact you. is there a personal guarantee in play and could this have any effect on it? etc.\n\nbasically, how much pain are you potentially bringing on yourself if you push back on this with varying degrees of intensity? is it worth the risk?", "replies": [], "depth": 1}, {"id": "gpf51ln", "text": "Pay them and thank them for the extra year of value on their money.  People like you absolutely ruin this business sometimes.  Stop trying to use every loophole to screw someone.", "replies": [{"id": "gpfyfeb", "text": "\"People like you\"? Maybe dial back the personal attacks a little?\n\nOP asks a reasonable question: At what point is it \"too late\" to ask for money you were legitimately owed at the time but did not ask to pay?\n\nI'm a LL and if I tried to pull this CAM charge more than a year later I'd fully expect my tenants to audit the shit out of it and make me prove every. single. expense. And then negotiate it down bc it is unreasonably late and any reasonable business would not pull this shit. Unless there are some extenuating circumstances, such as LL got hit with a bill twelve months late that they have to pass through etc.\n\nedit - grammar", "replies": [{"id": "gpg6k3b", "text": "&gt; \"People like you\"? Maybe dial back the personal attacks a little?\n\nMaybe thats a bit personal.  I don't think its wrong though.  You never been threatened by an estate attorney, a family lawyer, or a tenants brother in law who is a tax attorney about shit they know nothing about?  If OP has to post this here they do not have the experience in this segment of law.  \n\nIt is a reasonable question, and most of the comments here indicate what will happen when you make that claim and that is the issue.  Yours included.  Notice none of us from the CRE landlord side said it would just be \"woops fucked that up\", we all said what was going to happen AFTER.  \n\nOP said it isn't worth litigating (I'd agree).  What is the realistic expectation of telling a billion+ asset group you won't pay the reconciliation because it was late?  Would you want a lawyer that isn't sure if you even owe it to tell you what to do there?  One that has to post on reddit asking what is industry norms on this?  \n\nThis entire thing is a trainwreck IMO.", "replies": [{"id": "gph0r7l", "text": "Thanks for the reply. Yes I've had my share of those experiences. \nI just think reasonable questions merit reasonable answers, not abuse bc of something outside of OP's control. \nHave a better day!", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gpf5nne", "text": "If the charges are legitimate, why wouldn\u2019t the tenant pay? You think the pandemic has only been difficult for tenants? The bill is late so they shouldn\u2019t pay? What a ratty move you\u2019re trying to pull", "replies": [{"id": "gpf6qwh", "text": "because 'legitimate' isn't black and white here. there is an element of time at play, and the landlord's responsibility to handle this in a timely manner - which they did not. getting this bill a full year late could put undue burden on the tenant if they were expecting it a year ago and then assumed nothing was due when no bill was received. as a multi-billion dollar company, this responsibility all further falls on the landlord. lack of resources and inability to execute within a year isn't really a card they can play.\n\nat the same time, tenant likely isn't in a position where they can claim they owe nothing on these CAM charges. it's not like the lease explicitly says, if not received within 120 days, landlord forfeits all rights to pursue reimbursement. \n\nso like i said - not black and white. no need to be an ass when OP is asking a totally legit question that illuminates a situation that is likely to be educational to others on this sub.", "replies": [{"id": "gpf82a1", "text": "Op's client suffered no damages, the wording is vague and specifically says \"approximately\".  If OP was wanting to delay this payment since they just got 2020 cams or something that would be very reasonable.  They aren't, its like \"oh hey haha do we get $9,300 because they forgot to do the reconciliation? score!\".\n\nThere is no good faith argument really not to pay this.   The argument is if OP can send a nasty letter to scare them and settle for less because they probably don't want to pay a shit ton of legal fees either on their error over 9k.  Its all bad faith from OP's side.\n\nIs there any argument to the contrary?  People get tired of getting nickel and dimed and paying lawyers to argue about shit that literally didn't cost anyone anything in damages because one sides a cheap asshole who noticed a mistake and wants to take advantage.\n\nAnyways thats my two cents I'll look forward to the downvotes here like my other post.  If anyone has an actual ethical argument over not paying this I'd love to hear it.  I doubt there is even a legal one either.  Sounds like one of those disputes where no one wins but the lawyers to me. (which is also hilarious as OP's lawyer apparently is on reddit asking us to tell him what to tell his client, lot of value in those legal fees)", "replies": [{"id": "gpf9nap", "text": "&gt; Op's client suffered no damages\n\nI don't see how you can say this definitively.\n\nHow does tenant do their budgeting? Most companies finalize in Q3-Q4 for the following year. Had LL provided reconciliation at any point during the year, $10k in expenses could have been accounted for. By not providing it until the following year, CY budget must be adjusted mid-year. \n\nThis could easily have a material impact on tenant's operations, ability to make other payments, etc.\n\nHad LL provided reconciliation within 150 days or even 180 days this could have been avoided. But they did not.", "replies": [{"id": "gpfbzyl", "text": "OP's lawyer is here asking, and presumably including the pertinent info like the language.  No where does he mention any damages.  Thats kinda step 1 to this dispute.  I am just going off that.  If there are legit damages somewhere, then the LL probably does owe them.  They did breach.\n\nTenant also could have asked for a reconciliation.  You do of course have some duty to mitigate your damages no?   If you don't get a utilty bill do you just assume you don't owe anything?  \n\nWhen times are important a good lease will say time is of the essence, have liquidated damages or specifically address this situation.\n\nI am not saying the landlord didn't fuck up, but a reasonable expectation here is more like \"hey can we split this over the next couple years or pay it monthly or x\".  \n\nThe law generally speaking isn't huge on people getting windfalls over small mistakes that don't have a material impact on the contractual terms.  I've seen exactly what happened to op's client happen multiple times, even to law offices! I've never seen them not get paid.  I am not a lawyer but this all seems pretty nickle and dimey to me.\n\nedit- Just pondering the personal times I've ran into this, amending the language regarding this is something OP may want to consider for the future.  This be a great time to put a expense cap in or some of the more standard language regarding timelines that are more common in well developed leases.", "replies": [{"id": "gpfui02", "text": "As I said, this is not going to get litigated. As I also said, this situation doesn't have anything to do with the pandemic. Beer and wine stores have been thriving during the pandemic.  I didn't write this lease. I didn't negotiate this lease. I'm not trying to get something for nothing. The question is when do someone's demands for payment get stale when the wording in a contract is imprecise? It's comparable to statute of limitations. At some point, even if a person is owed the money,  the person waives his or her right to collect the money  if the person waits too long to demand payment of the money which is owed. In this instance, it's arguable that we are way past approximately 120 days and the landlord waived its rights to collect the money. On the other hand, it's arguable that the tenant should have known that this was coming and could have demanded a reconciliation statement a long time ago or just prepared to get hit with a charge. I think the answer is somewhere in between. So I am reaching out to some folks in the industry as a sounding board. As a practical matter, and as a matter of just being a professional, this is not a fight I'm going to pick with a landlord. On the other hand, I haven't seen CAM charges submitted this late before.\n\nThank you for everyone's input. Cheers!", "replies": [{"id": "gpg0iss", "text": "It doesn't have anything to do with the pandemic for your client.  Do the math on the dates on this and the LL missed a deadline while they were probably dealing with a ton of retail tenants refusing to pay rent, figuring out work from home for their employees, dealing with tax season, etc.  I'm not excusing that, they did make a mistake, but last spring was pretty rough for CRE retail type ownership groups.  I'm not saying legally that matters, but ethically yeah I mean I get how that could happen.  They probably are closing last year and auditing and discovered this just now.  \n\nLegally, I'll leave that to you :) \n\nPer CRE industry norms the top comment https://www.reddit.com/r/CommercialRealEstate/comments/lw3fpf/landlord_wants_to_collect_arguably_stale_cam/gpf4hgo/ is spot on.\n\nIf your client wants something (I made some suggestions above btw) now is a good time to ask to resolve this.  You seem to indicate this is a successful location for your client.  I'd focus more on this from a negotiating perspective than a legal one honestly.  \n\nWhat is the real course of action here if you don't think they need to pay it?  Send a letter saying they are past the deadline and it won't be paid, then what is your advice when they get a default notice and they are threatening to sue the guarantor personally or just turn them to collections? What will you do if next months rent is refused and they are threatened with lockout?  The entire question begs litigation and a NNN reconciliation is such small potatoes it seems stupid to invite that type of business disturbance to me.  Again, maybe not legally but ethically I mean your client does owe the money right?  You mention the lessor is large and experienced.  What do you realistically expect to happen when you just say no?  I'd start thinking next steps because either its a situation where your client does have leverage (say maybe their center is empty but them, and your client can go across the street, well this may get written off then) or they don't and you get hit with a default notice right after you say you aren't paying it and now we are paying legal fees on a profitable business location for a fairly legitimate expense and endangering that.\n\nWhats the NNN rate before and after the reconciliation?  For that kind of bump I'd assume its a fairly high value space.  \n\nAnyways TLDR pay them but great chance to renegotiate shit IMO", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gpf6ccl", "text": "As it sounds like you may know, typically savvy tenants include specific language limiting cam reconciliation to x days after year end, with the LL forfeiting right to collect if they miss the window.\n\nWithout that language (or specific state law), the tenant would be required to pay the amount owed. As long as the numbers are legitimate, It\u2019s something they were lucky to get to push back during a pandemic. Not the worst outcome.\n\nAs others have mentioned, take into account other variables, but generally LLs will work out a payment plan for something like this.", "replies": [{"id": "gpf71im", "text": "&gt; typically savvy tenants include specific language limiting cam reconciliation to x days after year end, with the LL forfeiting right to collect if they miss the window.\n\ni have a running list of provisions to make sure i try to get included as i negotiate my next lease...just added this one. cheers", "replies": [{"id": "gph062x", "text": "Hey Joe, do u mind share ur list of provisions in inbox? Would love to learn more", "replies": [{"id": "gpjkifd", "text": "Honestly that be a great thread for everyone to contribute to", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gpf6fc3", "text": "The standard language in MN is CAM summary must be completed by June - so the 120 days in your client lease is not unusual, but the notice 14 months after calendar year (10 month after your client reconciliation period) is very unusual.  \n\nYour client got the reconciliation report 300 days after the 2019 calendar year - no where near the 120 days listed in the lease even if it did say 'approximately.'  300 is not approximate to 120.  \n\nI would never have the audacity as a LL to pull that crap I would be embarrassed.  Tell them to pound sand.", "replies": [], "depth": 1}, {"id": "gpf7wal", "text": "From my experience, if the charges are stated in the lease and the LL has records to prove the charges, the tenant must pay.  \n\nA defense that will be used is, the lease probably has a clause saying the tenant can request explanation of the escrow whenever, so since they did not it\u2019s in them, which sucks because most tenants like a bar/deli won\u2019t anyway.", "replies": [], "depth": 1}, {"id": "gpfbr5m", "text": "For benefit of anyone else that did not know what CAM charges are:\n\n `CAM charges are the costs of common area maintenance that landlords pass on to their tenants. These maintenance costs can be related to any cost of managing and maintaining the commercial property. In conversation, you'll likely hear these charges simply referred to as \"CAMs.\" Unfortunately, there's no universal agreement on what exactly CAM charges include. The costs that are included in CAM fees can vary from one market to another, and even locally from one landlord to another.`", "replies": [], "depth": 1}, {"id": "gpfja47", "text": "Landlord breached when they failed to notify within \u201capproximately 120 days.\u201d Maryland courts would hold that a reasonable person would consider 15 months from year-end outside the agreed contract terms. \n\nLook for any late fees in that $9k. Maybe I\u2019ve become cynical in my old age, but if local management is that bad then there\u2019s a solid chance LFs are rolled in there. Fight them on that. \n\nDecide what outcome you want - cancellation, reduction, time to pay, etc. Your local PM likely can\u2019t negotiate, but the corporate VP of Leasing/Contracts/Whatever will. (They\u2019re also far more likely to hand-wave $9k than a PM making $60k salary.) Keep it friendly and a couple phone calls should sort it out.", "replies": [], "depth": 1}, {"id": "gpfp2zf", "text": "*\"The lease says a CAM reconciliation report will be sent* ***approximately*** *120 days after the end of the calendar year. Awfully vague language....\"*  \n\nIt's not vague at all, it's actually quite precise.\n\nWhat it lacks is specificity.\n\nHe can argue that he sent it last February....he can argue that he meant \"prior year\"....\"no later than 120 days after (a) calendar year\".\n\nI would never go back 2 years on a tenant, but, there's nothing stopping your landlord from doing so.", "replies": [], "depth": 1}, {"id": "gpfq1ib", "text": "Take an extra 10 months auditing the CAM charges.    \n...but ultimately it is owed (assuming all legitimate).  I'd try to negotiate on LL's admin fees, etc. (if applicable).  And definitely don't do this if you don't want a harder time negotiating renewal.", "replies": [], "depth": 1}, {"id": "gpftxqw", "text": "Can't speak for Maryland, but as a young broker in CA I've heard a fair share of horror stories. My old boss had a client in a class A high rise in Southern California. The client/tenant was in this property for a 15 year term and were well into their lease, but not within 2 years of the term ending (special language to break lease for op x that exceeds rent in the final two years). A new company had purchased their building and hired a forensic auditor to go over the books. The auditor came up with ~$30,000 in op x that were not charged correctly over the term starting after the base year and put an invoice on their front desk demanding it be paid immediately. There was nothing they could do about it because they did not have any expiration dates on op x. That's one of the things we looked for in the free lease reviews we offered to tenants renewing in the next 24 months or so.", "replies": [], "depth": 1}, {"id": "gpfw9kq", "text": "Offer to void it with lease extension. Work a deal.", "replies": [{"id": "gpgag5j", "text": "Bingo, state that they were out of their 120 day timeline and offer 2 or 3 months on the back end of the lease.  It's likely that the LL has missed these charges before (which is a nice savings for the tenant) and will most certainly make you pay going forward.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gpfxpou", "text": "Ok, as someone who does the cam reconciliation for my commercial properties and bills the tenants back it's definitely within the LL right to ask for it and bill for it.  It is absolutely shitty to do it now almost 15 months later tho.  I am usually done with all my cam billing by april for the prior year.  \n\nIt's a huge pita that no system I know of can handle easily.\n\nI'd work with the landlord on it.  But I feel for both you the tenant and the landlord cause the landlord may end up eating some of this or a majority of it.  It's still a real cost to them.", "replies": [], "depth": 1}, {"id": "gpg65ny", "text": "If there is no definitive deadline for the landlord to provide a reconciliation and your client was in occupancy, than they owe the money. Regardless, the reconciliation process was mismanaged by the landlord.\n\nHere\u2019s an idea though - almost every landlord I know is issuing large reconciliation credits for 2020 due to COVID related OpEx reductions. Perhaps these will be an offset between the amount owed for 2019 and any potential credit for 2020?\n\nOr as others said, if the tenant has an audit right you could pick apart the 2019 expenses and try to minimize their exposure. Probably not worth the effort though.", "replies": [], "depth": 1}, {"id": "gpgd5ql", "text": "In practice, and as others have commented, CAM is usually (if there is such a thing as a usual lease) estimated and paid monthly, with an expected true-up using actual expenses. Yes, it's likely a result of poor financial controls to invoice 14 months after the fact but it's possible (change in manager, owner, accountant) that they closed the books very late or amounts were miscalculated. There are companies that work on contingency for landlords AND tenants to find under or over-billed amounts. \n\nThe Tenant may have a right to audit all recoveries (amounts and what's allowable from the lease), which you may want to consider as leverage for negotiating the amount and timing for what's owed.", "replies": [], "depth": 1}, {"id": "gpgfhqk", "text": "Also a lawyer, but not in your jurisdiction and this is general discussion not a legal opinion:\n\nIf LL is claiming that tenant's refusal to promptly pay the CAM invoice is a breach, I think you have a strong argument that LL breached first and can't enforce via its remedies under the lease, since 14 months is not \"approximately 120 days\" by any stretch of the imagination. However, while LL may not be able to use its contractual remedies to enforce collection by claiming tenant's breach here, LL can probably collect outside the terms of the lease contract by arguing quantum meruit or unjust enrichment, since they did actually spend the CAM money for tenant's benefit and tenant did receive that benefit. It's hard to claim that tenant was harmed or prejudiced by the delay, since they would have had to pay CAMs eventually and this was effectively an interest-free loan for a year.\n\nLong story short, I think you're in a good position to negotiate a favorable payment plan over time to avoid litigating it, but I think the tenant ends up paying the CAMs.", "replies": [], "depth": 1}, {"id": "gpj5vhh", "text": "Some, but not all, of the leases I've worked with have a clause that says the tenant may examine and verify the CAM charges and in event of dispute can ask to have them itemized. Do you know how the $9,300 was computed? Are the components legit charges, or is it packed with bogus admin costs, late charges, and fees for services that were not actually rendered (often assessments for advertising/promo, security and landscaping maintenance services when none or few were provided). When landlord's cheat it's often by inflating the CAM charges. If you are representing a tenant in a commercial lease it's always good to insert a clause that gives the tenant the right to examine and verify the the CAM charges at a time and place convenient to the landlord.", "replies": [{"id": "gpj7kg6", "text": "Property manager sent an e-mail in early February 2021 without a reconciliation report. Property manager told tenant he had until March 1, 2021 to pay $9,341.62 for 2019 additional CAM charges. Client replied, that's fine, I will need some time to pay, can I pay it in installments and can I see the reconciliation report as is required by the lease? Client has not received the reconciliation report.  The property has gone through several ownership and management changes in the past few years and was in receivership/foreclosure for a while. I didn't write or negotiate the lease. Current landlord did not write or negotiate the lease. We will probably just take a look at the reconciliation report and, assuming it's OK, work out an installment plan.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gq656ms", "text": "Maryland CRE professional and management company owner here .\nThere\u2019s no time limit on the CAM reconciliations to my knowledge. They may have done a very poor job keeping records as it\u2019s traditionally done annually but the money is still owed.\nAnd subject to the lease, your client has the right to audit those fees. Not an uncommon occurrence", "replies": [], "depth": 1}]