The Hidden Costs of Relying on CAM Recovery

A common billing practice assumes that the tenant utility costs that don't get recovered in the submetering will get recovered in the CAM.

Ehhh, no.

You can understand the thinking. For leases that allow a common area maintenance (or "CAM") fee based on square footage, you can envision it: your tenant submeter readings don't box out to what you're spending to get the utilities to the tenants. So you sweep the difference into the CAM.

But this idea doesn't actually work. In fact, it doesn't make you money, it costs you money. Here's why.

Why "Recovery Through the CAM" Is a Bad Idea

1. Tenants don't want to absorb other tenants' costs.

High CAM numbers stand out on the invoice, and tenants will fight you tooth and nail to not pay costs they believe were incurred by other tenants. A high CAM opens you up to a million questions and potential legal disputes.

2. You're likely breaking your lease.

Costs to tenants should always be clearly defined and irrefutable. Not only is that the right way to do business, but it's also good business. Misallocation of costs isn't a slap on the wrist – it's a lawsuit waiting to happen.

3. Rare is the contract that allows backbilling.

Only a few properties have clauses that allow them to collect payments on previous billing periods. And since you can't effectively recover through the CAM and you can't bill retroactively, you're going to end up eating these tenant-unspecific costs.

The most cost-effective and sure way to recover tenant utility costs is to accurately track tenant consumption and minimize the CAM fee. After all, the amount you want to recover is teensy compared to how much you're going to pay in legal fees. It's not worth it, and it'll probably cost you much more than accurate submetering, without garnering you any of benefits that come along with valid submetering data: the ROI in higher overall recovery, better tenant retention, and lower utility consumption.