Costs associated with environmental cleanup, contamination assessment, soil or groundwater remediation, and hazardous material abatement on the property.
Key Takeaways
| Lease Type | Recoverable? | Controllable? |
|---|---|---|
| NNN | No | No |
| Modified Gross | No | No |
| Full-Service Gross | No | No |
Approximate budget share: 0% of total CAM pool.
Environmental remediation covers the investigation and cleanup of contamination on commercial property, including Phase I and Phase II environmental site assessments, soil excavation and disposal, groundwater monitoring and treatment, asbestos abatement, lead paint removal, underground storage tank removal, and mold remediation in structural systems. These costs are the property owner's obligation under federal and state environmental law (CERCLA, RCRA, and state equivalents). Remediation work is capital in nature because it addresses a pre-existing condition, removes a liability, and increases the property's value. It does not maintain the common areas in their current condition; it restores the property from a contaminated state. No standard lease structure makes environmental remediation a tenant-recoverable expense through CAM. Even triple-net leases with broad pass-through language typically exclude environmental cleanup either explicitly or through the capital expenditure exclusion. Tenants should challenge any environmental-related charge in the CAM reconciliation and document the challenge in writing. Environmental costs appearing in a transaction year are especially suspect, as the landlord may be attempting to shift acquisition-related cleanup costs to the tenant base.
Overcharge Risk
$5,000-$50,000+/year
typical annual overcharge when this line item is disputed
Landlords pass through environmental remediation costs as CAM operating expenses when contamination cleanup is a property owner obligation and a capital expenditure that increases the property's value.
| Legitimate Charge | Suspicious Charge |
|---|---|
| Annual backflow preventer testing as a routine plumbing compliance item | Soil remediation or groundwater treatment costs billed through CAM |
| Routine HVAC refrigerant management per EPA requirements | Asbestos abatement or lead paint removal characterized as "building maintenance" |
| Standard hazardous waste disposal from building operations (e.g., fluorescent bulbs) | Phase I or Phase II environmental assessment fees in the CAM pool |
Environmental remediation is a property owner obligation. Contamination cleanup costs increase the property's value and are capital in nature. These costs should never appear in the CAM pool. Challenge any environmental remediation charge as a non-recoverable landlord responsibility.
Check Your Environmental Remediation Charges
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