What is a base year in a commercial lease?

A base year is the reference year used to calculate a tenant's share of operating expense increases. In a gross lease with an expense stop, the tenant pays only for operating expenses that exceed the base year amount. The base year is typically the first full calendar year of the lease term, though it can be any year specified in the lease.

Why would a landlord understate base year expenses?

A landlord may understate base year expenses intentionally (to generate ongoing overcharge revenue) or inadvertently (due to accounting errors, incomplete billing in the base year, or vacancies that reduced actual costs below stabilized levels). Intentional understatement is grounds for a dispute. Inadvertent errors in the base year are correctable through negotiation.

How do I get the actual base year operating expenses?

Request the building operating expense records for your base year under your lease's audit rights clause. Landlords are typically required to provide supporting documentation upon written request. CAMAudit's dispute letter draft includes the appropriate language for requesting these records.

What if my lease does not specify a base year expense amount?

If the base year amount is not stated in the lease, it should default to the actual operating expenses incurred in the base year. Request the base year reconciliation or operating expense report from your landlord. If the landlord cannot provide it, that itself is grounds for a dispute.

Math-Based Rule

Base Year Error: How CAMAudit Detects This Overcharge

If your base year operating expenses were understated, every CAM reconciliation you have paid since lease signing has been inflated. A $10,000 base year understatement costs a 10% pro-rata tenant $1,000 per year for the life of the lease.

How CAMAudit Detects This

CAMAudit extracts the base year from your lease and the base year expense amount (if specified in the lease or a lease exhibit). It then compares that figure to the actual operating expenses from the base year period, which you can upload as a separate document.

If the base year expenses on file are lower than actual costs for that period, CAMAudit calculates the annual overcharge: the difference between the correct base year amount and the stated base year amount, multiplied by your pro-rata share. Over a 5-year lease term, even a $10,000 base year understatement can result in $50,000 in cumulative overcharges.

CAMAudit also checks whether the landlord properly included all operating expenses in the base year calculation or selectively excluded costs to lower the baseline artificially.

Real-World Example

An office tenant signed a 7-year lease with a base year of 2022. The lease stated base year operating expenses of $18.50/sq ft. The actual 2022 operating costs (available from building records) were $21.20/sq ft. CAMAudit calculated the understatement: $2.70/sq ft. For a 3,500 sq ft tenant, this inflated every year's charges by $9,450 above what they should have been, totaling $66,150 in cumulative overcharges over the lease term.

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Base Year Error: How CAMAudit Detects This Overcharge

How CAMAudit Detects This

CAMAudit also checks whether the landlord properly included all operating expenses in the base year calculation or selectively excluded costs to lower the baseline artificially.

Real-World Example

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Upload your lease. CAMAudit runs 13 detection rules in under 5 minutes.

Find My Overcharges

See a sample report first

Frequently asked questions

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Find overcharges in your CAM reconciliation. Most audits complete in under 5 minutes.

Find My Overcharges See a sample report first