What is an arbitration clause in a commercial lease?

An arbitration clause requires landlord-tenant disputes, including CAM reconciliation disagreements, to be resolved through binding arbitration instead of court. The arbitrator's decision is final and enforceable. Arbitration is faster and cheaper than litigation but limits appeal rights.

Is arbitration better than litigation for CAM disputes?

For most CAM disputes, yes. Most overcharges range from a few thousand to tens of thousands of dollars, amounts where court costs can exceed what you recover. Arbitration keeps the process proportionate. The key caveat: confirm the arbitration clause preserves document discovery rights so you can access the landlord's invoices and general ledger.

Can I audit CAM charges if my lease has a mandatory arbitration clause?

Yes. The arbitration clause controls how you resolve disputes. Your audit rights are governed by a separate provision in the lease. A mandatory arbitration clause does not prevent you from running a CAM audit and submitting the findings as evidence in arbitration.

What happens if my lease has no arbitration clause?

Without an arbitration clause, disputes go to state court. Litigation is more expensive and slower than arbitration, but it preserves full discovery rights and the option for a jury trial. For large overcharges or complex disputes, litigation may be worth the cost.

Arbitration Clause

Last updated: April 2026

By Angel Campa, Founder

An arbitration clause controls how CAM disputes get resolved. The details matter: discovery rights, fee-shifting, and venue determine whether you can enforce an audit finding or whether the process costs more than the overcharge.

What Is a Arbitration Clause?

An arbitration clause in a commercial lease requires disputes between landlord and tenant, including CAM reconciliation disagreements, to be resolved through binding arbitration rather than court litigation. Arbitration is faster and less expensive than litigation, but discovery rights and appeal options are more restricted.

Why This Clause Matters for CAM Audits

For CAM disputes, an arbitration clause determines whether you can enforce your audit findings at all. Courts are expensive and slow relative to most CAM overcharge amounts. A well-drafted arbitration clause preserves the right to obtain the landlord's books and records during discovery, which is essential for CAM audits. A poorly drafted clause strips discovery rights or requires arbitration in a distant city, making enforcement a losing proposition before it starts.

Sample Lease Language

“Any dispute arising under this Lease relating to Common Area Maintenance charges, operating expense reconciliations, or audit rights shall be resolved by binding arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules. The arbitration shall be conducted by a single arbitrator with not less than ten (10) years of commercial real estate experience, in the metropolitan area where the Property is located. Each party shall be entitled to document discovery sufficient to support its position. The prevailing party shall be entitled to recover its reasonable attorneys' fees and arbitration costs.”

This is illustrative language only. Your actual lease language controls your rights.

Red Flags to Watch

⚠Mandatory arbitration with no discovery rights: prevents review of landlord's books and records
⚠Arbitration required in a city far from the property, making participation costly
⚠Landlord unilaterally selects the arbitrator, creating bias risk
⚠No fee-shifting provision, making small-to-mid overcharge disputes economically impractical
⚠Very short time limit to demand arbitration (30 days or less after receiving reconciliation)

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Negotiation Tips

✓Require the arbitrator to have commercial real estate experience and be selected jointly by both parties
✓Specify document discovery rights: the right to inspect general ledger, invoices, and insurance premium statements
✓Include a fee-shifting provision for the prevailing party to deter frivolous positions
✓Set arbitration venue at or near the property location, not at landlord's corporate headquarters
✓Negotiate a tiered process: direct negotiation first, then arbitration, which resolves most disputes before formal proceedings

Key Data

12-18 months
Commercial real estate arbitration through AAA typically resolves in 12 to 18 months, compared to 24 to 36 months for court litigation [industry estimate]
Source: American Arbitration Association (2024)

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This 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.