Glossary
Financial Concepts
Depreciation
An accounting method that spreads the cost of a long-lived asset over its useful life. Depreciation is almost universally excluded from commercial lease CAM definitions. Tenants pay for actual expenses, not accounting allocations.
Firm impact
Including depreciation in the operating expense pool means tenants pay for the theoretical decline in asset value rather than actual maintenance and operating costs. Leases almost always exclude it explicitly. When it appears in the pool, it is typically a direct and uncontested violation.
How this gets abused
A landlord included $450,000 of building depreciation in the annual operating expense pool. Tenants paid a pro-rata share of this non-cash accounting entry. The lease explicitly excluded 'depreciation.' The inclusion was a direct violation with no factual defense.
Practitioner note
Review the CAM pool for line items described as 'depreciation,' 'D&A,' or 'amortized assets.' Also check for unusually large maintenance charges on assets not recently replaced. These may be depreciation disguised as maintenance expenses.
Related terms
FAQ
Questions about depreciation
Is depreciation ever allowed in CAM?
Almost never. Most commercial leases explicitly exclude depreciation from operating expenses. If the lease is silent, depreciation is still generally not recoverable as a current operating cost.
Does CAMAudit flag depreciation charges in the CAM pool?
CAMAudit's Excluded Service Charges rule scans for non-cash accounting entries such as depreciation and amortization of building costs. When these appear in the reconciliation and the lease excludes them, CAMAudit flags the amounts as overcharges.
You know the term. Now check the math.
Get started to deliver white-label CAM audit reports under your firm brand.