Vacant Suite Improvements in CAM: The Benefit Test and How to Challenge These Charges
You are paying CAM every month. Part of what you are paying for should make your tenancy better. Improvements to a vacant suite down the hall do not do that.
Tenant improvement (TI) costs and leasing commissions for vacant spaces are among the most aggressive inclusions some landlords attempt in CAM reconciliations. CAMAudit flags this pattern most often in properties with high vacancy rates, where landlords face pressure to push leasing costs somewhere that looks like ordinary operating expense. In buildings with 15% or more vacancy, TI amortization can add 5% to 15% to the stated CAM pool.
Every CAM charge must pass a fundamental test: does this expense benefit the tenants who are paying for it? Tenant improvements to a vacant suite serve one party, the incoming tenant. Existing tenants receive no benefit from new flooring installed in a suite they cannot access and will never use.
40% of CAM reconciliations contain at least one billing error, with tenant improvement and vacant-space costs among the most frequently attempted improper inclusions (Tango Analytics, 2023)
Why Vacant Suite Costs Fail the Benefit Test
Every CAM charge must pass a fundamental test: does this expense benefit the tenants who are paying for it?
Tenant improvements to a vacant suite serve one party: the incoming tenant. The improvements exist to attract and accommodate that specific new occupant. Existing tenants receive no benefit from new flooring installed in a suite they cannot access and will never use.
Leasing commissions are even more clearly excludable. A leasing commission pays a broker to find a new tenant. That is a direct cost of the landlord's ownership and management activity, not an expense of maintaining the common areas.
Many leases explicitly exclude both categories:
"CAM shall not include any costs incurred in connection with the leasing of space in the Building, including, without limitation, tenant improvement allowances, brokerage commissions, and legal fees related to lease negotiations."
If your lease does not have that explicit language, the benefit test and the general principle that CAM covers common area operating expenses still apply. A vacant suite is not a common area.
For context on the full range of expenses that commonly appear in CAM pools without authorization, see Excluded Services in CAM Charges.
How These Charges Appear in Reconciliations
Most landlords do not label these costs "tenant improvements." They show up disguised as:
- "Building improvements" or "property improvements"
- "Renovation costs" or "suite renovation"
- "Leasing costs" or "occupancy costs"
- Generic line items like "other operating expenses"
Some landlords fold TI costs into a capital expenditure amortization pool. They spend $120,000 improving a vacant suite, capitalize it, and then amortize it over 10 years as a CAM expense. This passes the capital cost through to existing tenants over time while calling it something other than "tenant improvements." For how capital cost amortization works in CAM pools, see Amortization of CapEx in CAM Charges.
Dollar Example
Building: 100,000 sq ft. Your space: 8,000 sq ft. Pro-rata share: 8%.
Landlord spends $180,000 improving a vacant 5,000 sq ft suite to attract a new anchor tenant. The cost is included in "property improvements" in the CAM pool.
Your share: $180,000 x 8% = $14,400 in your reconciliation year.
Over a 5-year lease (if amortized at $18,000/year), you pay $1,440/year or $7,200 total for improvements to a space you never benefit from.
15-20% of annual CAM overcharges are recoverable through audit, with vacant-suite TI cost disputes among the highest-dollar findings in high-vacancy properties (Springbord Research, 2023)
How to Identify These Charges
- Pull the "improvements," "renovations," and "capital expenses" line items from your reconciliation.
- Request the supporting invoices for any improvement cost above $5,000.
- Ask the property manager to identify which suite each improvement applies to.
- Cross-reference against the building occupancy schedule for the year. Which suites were vacant?
- Flag any invoice for work performed in a suite that was vacant or in lease-up during the reconciliation period.
- For amortized items, request the original capital expenditure register showing when the project was completed and which area it covers.
The Direct Attribution Argument
Even where your lease is silent on the exclusion of TI costs, you can argue direct attribution. If an expense is directly attributable to a single tenant's suite, it should not be in the common-area pool at all. It is a cost that should be billed directly to that tenant or absorbed by the landlord.
Courts have applied this principle in cases where landlords tried to allocate single-tenant costs across the building population. The argument is not complicated: show that the expense serves only one space, that you have no access to or benefit from that space, and that including it in the pool violates the basic purpose of CAM.
What Documentation to Request
- Contractor invoices for all improvement line items, with suite numbers
- Project scope documents showing which areas were improved
- Building occupancy schedule for the reconciliation year (showing vacancy rates)
- Capital expenditure register if any improvements are amortized
- Leasing commission ledger for the period
- Any lease amendments or TI agreements executed during the year
After collecting documentation, see CAM Recovery for the dispute process and Security Costs in CAM Charges for a related overcharge pattern involving tenant-specific service bundling.
Frequently Asked Questions
My lease has a gross-up provision. Does that let the landlord fill in vacant suite costs?
No. Gross-up provisions address operating expenses that scale with occupancy, like utilities and cleaning services. The gross-up means: if the building were fully occupied, what would those variable costs be? It does not authorize the inclusion of TI costs or leasing commissions, which are not variable operating expenses. They are one-time capital or transactional costs.
What if the improvement benefits the whole building, like upgrading shared HVAC?
That is a different question. Building-wide capital improvements that benefit all tenants have a stronger argument for CAM inclusion, subject to your lease's capital expenditure rules. The dispute applies specifically to improvements installed inside a single tenant's private suite that have no common-area benefit.
The landlord says the new tenant's occupancy reduces my pro-rata share. Isn't that a benefit?
A reduction in your pro-rata share when a new tenant moves in is a separate, mathematical adjustment. It does not convert the new tenant's TI costs into an expense you should share. You cannot be charged for the cost of generating the benefit that reduces your share.
Can I dispute these charges after I signed a lease with no explicit TI exclusion?
Yes. The absence of an explicit exclusion does not mean inclusion is automatic. You can argue the benefit test, direct attribution, and the general principle that CAM covers common area operating costs. The landlord still must show these expenses are proper CAM inclusions under the terms of your lease.
How much are these charges typically worth?
In buildings with high vacancy, TI amortization can add 5% to 15% to the stated CAM pool. On a $500,000 pool, that is $25,000 to $75,000 in potentially challengeable expenses. At a 10% pro-rata share, you are disputing $2,500 to $7,500 annually.
CAMAudit's detection engine flags improvement line items and cross-references them against occupancy data to identify costs potentially attributable to vacant suites.
Related: Capital Expenditures in CAM Charges | Pro-Rata Share Calculation Errors | CAM Reconciliation Explained
Frequently Asked Questions
Can a landlord charge vacant suite improvement costs through CAM?
Generally no. Tenant improvement costs for vacant spaces fail the common benefit test: they do not benefit the existing tenants paying CAM, they benefit the future tenant of that space and the landlord's leasing effort. Most properly drafted commercial leases explicitly exclude TI costs and leasing commissions from the CAM pool.
What is the benefit test for CAM expenses?
The benefit test asks whether a given expense provides a benefit that is proportionally shared by all tenants contributing to the CAM pool. Lobby renovations, parking lot resurfacing, and exterior lighting benefit all tenants proportionally and pass the test. Improvements to a specific vacant suite benefit only the future occupant of that space and fail the test.
How do landlords hide vacant suite TI costs in CAM reconciliations?
The most common method is reclassifying TI costs as routine maintenance or capital improvements to common areas. A full interior renovation of a vacant suite may be described as 'building improvements' or 'interior maintenance' in the reconciliation. Identifying the actual scope of work requires requesting invoices and contractor descriptions, not just the line item label.
What dollar amount should I look for when checking for TI cost overcharges?
In buildings with high vacancy, TI amortization can add 5% to 15% to the stated CAM pool. On a $500,000 pool, that is $25,000 to $75,000 in potentially challengeable expenses. At a 10% pro-rata share, your exposure is $2,500 to $7,500 annually. Any maintenance line item over $5,000 that does not obviously correspond to a common area repair is worth requesting invoices for.
Can I request invoices for maintenance items in my CAM reconciliation?
Yes. Under most commercial leases' audit rights provisions, you are entitled to inspect the books and records supporting the reconciliation, including invoices for maintenance and improvement items. Request the invoices for any line item that looks unusually large or that uses vague descriptions like 'interior improvements' or 'building renovation.'