Base Year Error: How a Low Starting Number Costs You Every Year of Your Lease
If your base year operating expenses were understated, every CAM reconciliation you have paid since lease signing has been inflated. A $10,000 base year understatement costs a 10% pro-rata tenant $1,000 per year for the life of the lease.
How CAMAudit Detects This
CAMAudit extracts the base year from your lease and the base year expense amount if it is specified in the lease or a lease exhibit. CAMAudit then compares that figure to the actual operating expenses from the base year period, which you can upload as a separate reconciliation document for that year.
CAMAudit's base year detection rule calculates the annual overcharge when the base year expenses on file are lower than actual costs for that period: the difference between the correct base year amount and the stated base year amount, multiplied by your pro-rata share. Over a multi-year lease term, even a modest base year understatement results in significant cumulative overcharges.
CAMAudit also checks whether the landlord properly included all operating expenses in the base year calculation or selectively excluded cost categories to lower the baseline artificially. Selective exclusions that do not appear in the lease definition are a form of base year manipulation that CAMAudit flags.
Real-World Example
An office tenant signed a 7-year lease with a base year of 2022. The lease stated base year operating expenses of $18.50/sq ft. The actual 2022 operating costs available from building records were $21.20/sq ft. CAMAudit calculated the understatement: $2.70/sq ft. For a 3,500 sq ft tenant, this inflated every year's charges by $9,450 above what they should have been, totaling $66,150 in cumulative overcharges over the lease term.
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Need to extract lease terms before your audit?
A CAM audit is only as accurate as your lease data. lextract.io extracts 126 structured fields from any commercial lease PDF: CAM definitions, pro-rata share, caps, base year, and audit rights. So you have the exact terms your landlord is supposed to follow.
Go to lextract.ioThis 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.