A CAM cap structure where unused cap capacity from low-expense years carries forward, allowing the landlord to exceed the single-year cap percentage in later years by "catching up" on the accumulated unused increases. This is less protective than a non-cumulative cap.
Under a cumulative cap, the maximum allowable CAM for any year equals the base year amount increased by the cap percentage for each elapsed year since the base, regardless of whether actual expenses hit the cap in prior years. If actual expenses were below the cap in Year 2, the landlord can charge above the stated annual cap percentage in Year 3, up to the cumulative ceiling. The formula is: Max Year N = Base Amount multiplied by (1 + cap rate) raised to the power of N.
A lease has a 5% cumulative cap. CAM increases only 2% in Year 2 and 1% in Year 3. In Year 4, the landlord passes through a 12% increase, citing cumulative unused capacity. The tenant expected the cap to limit increases to 5% per year and is blindsided by the large bill.
If your lease has a cumulative cap, track the cumulative ceiling independently each year. Know the difference between the stated cap percentage and the actual cumulative limit. A non-cumulative cap provides stronger protection against large single-year increases.
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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.
