A cost that extends the useful life of a building asset, improves its value, or replaces a major component - such as a new roof, HVAC system, or parking lot repaving. Capital expenditures are typically excluded from CAM in most commercial leases.
GAAP distinguishes capital expenditures (capitalized, depreciated over useful life) from operating expenses (expensed in the current period). Most commercial leases exclude CapEx from the CAM pool explicitly. However, some leases allow amortized CapEx - spreading the cost over the asset's useful life.
A landlord replaced the entire HVAC system ($380,000) and included it in the current year's CAM as a 'repair and maintenance' item. The full $380,000 was allocated across all tenants in that year - no amortization, no disclosure that it was a system replacement.
Request the underlying invoices for any large maintenance line items (over $10,000). If an invoice describes "replacement," "installation," or "new" equipment, it is likely a capital expenditure that should be excluded or amortized. Extract your lease's CapEx exclusion clause with lextract.io to verify what your landlord is allowed to pass through.
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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.
