A cap structure that limits total CAM charges to a fixed percentage or dollar amount above the base year expense level. The base year establishes the benchmark, and the cap constrains how far above that benchmark the landlord can charge in subsequent years.
Base year cap sets the maximum allowable expense in Year N as a function of the base year amount. It can be expressed as a percentage (e.g., CAM shall not exceed 120% of base year expenses) or a dollar figure (e.g., CAM shall not exceed base year plus $2.00/SF). The base year is typically the first full calendar year of the lease or the lease commencement year. Artificially deflated base years, where the landlord defers maintenance or under-reports expenses in Year 1, undermine this structure.
A landlord defers routine maintenance and delays vendor payments during the base year, producing an artificially low expense figure. In Year 2, expenses "increase" 18% simply because the base year was suppressed. The cap allows this increase because it measures from the deflated base.
Audit your base year expenses just as thoroughly as subsequent years. If the base year seems unusually low compared to market benchmarks, it may have been deflated to give the landlord more room under the cap in future years.
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Find My OverchargesThis page provides general educational information. It is not legal advice and may not reflect the most current law in your state. Consult a licensed attorney for advice specific to your situation.
