Once parties to a lease (those being a landlord and its tenant) agree that the tenant will pay a share of operating expenses (or call them common area maintenance – CAM – costs) or taxes, what has been agreed is that the tenant will pay its share, not 35% of its share (or some other figure, like 92% or 107%). Yes, its share!

We’ve Ruminated about some aspects of what falls into the bucket called CAM Costs or Operating Expenses, and we’ve Ruminated about what might and might not be a “tax.” [We have more to say about a “tax,” but not this week.] But, once you’ve determined what falls into the bucket and what the tenant’s percentage might be, is there anything to do beyond some multiplication? Very often, the answer is “yes.” Tenants like to “cap” what they pay, i.e., pay no more than some negotiated limit even after Operating Expenses or taxes have been allocated by a fair percentage formula. [Read more…]