A CAM reconciliation showed $22,000 in utility charges for "building services." The backup documentation revealed $14,400 for parking lot lighting and exterior common area power (appropriate), $4,200 for utilities in Suites 200 and 205 (individually metered tenant spaces), and $3,400 for the landlord's property management office space. CAMAudit flagged $7,600 as non-common-area utility charges that should not appear in the shared CAM pool.
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11
Rule 11 of 20 · Classification rule
Utility Overcharge: Why Tenants Should Not Pay for Other Tenants' Electricity in CAM
Utility charges in CAM should reflect only shared consumption. Any utility cost tied to a specific tenant's space or to a non-common area is an improper pool allocation.
If a landlord is including utility costs for individually metered tenant spaces or non-common-area services in the CAM pool, the client is subsidizing expenses that belong to specific tenants. These misallocations typically run $2,000 to $8,000 per year in multi-tenant buildings.
What it checks
A utility overcharge in CAM occurs when utility expenses for individually metered tenant spaces, vacant units, or non-common-area consumption are pooled into shared CAM charges allocated to all tenants. Only utility costs for genuinely shared spaces belong in the CAM utility pool: lobbies, parking areas, exterior lighting, HVAC for common corridors, and similar facilities used by all tenants collectively. Including tenant-specific or non-common-area utility costs in the pool inflates every tenant's share of expenses they did not consume and had no ability to control. CAMAudit's utility overcharge detection rule uses AI classification to evaluate each utility line item in the reconciliation and categorize it by consumption type, then flags any item that does not match common area consumption characteristics, including charges referencing specific unit addresses, sub-metered tenant spaces, or consumption categories inconsistent with shared facility operations.
The logic
Utility Overcharge in 3 passes
- 1
CAMAudit uses AI classification to evaluate utility line items in the CAM reconciliation and categorize them by consumption type: common area, which is eligible, individually-metered tenant spaces, which are not eligible, vacant space, which is not eligible, and landlord-specific uses such as management offices or storage units, which are not eligible without explicit lease authorization.
- 2
CAMAudit's utility overcharge detection rule flags utility line items that do not match common area consumption characteristics, including line items referencing specific unit addresses, sub-metered tenant spaces, or consumption categories that are inconsistent with shared facility operations based on the lease definition of common areas.
- 3
CAMAudit generates a finding identifying the specific charge, the consumption category, and the reason it does not qualify as a shared common area expense. CAMAudit's finding includes the documentation request language your firm needs to obtain the utility bills and sub-metering records under the client's audit rights clause.
What a finding cites
Related glossary terms
FAQ
Questions about utility overcharge
How does a firm know if utilities in a client's building are individually metered?
The lease and the building's utility setup determine this. If a suite has its own electric meter, gas meter, or sub-meter, those costs should be billed directly to the tenant, not pooled in CAM. Request a copy of the utility billing arrangement from the landlord if it is not clear from the lease.
Can landlords include vacant unit utility costs in CAM?
Generally no. Utilities consumed in vacant spaces benefit neither the common areas nor the occupied tenants and should not be allocated through the CAM pool. Some leases include gross-up provisions that address this indirectly, but direct allocation of vacant-unit utility costs is not a permissible CAM charge.
What common area utilities are typically legitimate CAM charges?
Parking lot and exterior lighting, lobby and corridor lighting and HVAC, elevator power, common area water for landscaping and restrooms, and similar shared facility consumption are generally legitimate. The key is that the consumption must benefit all tenants collectively rather than specific units.
Can a landlord mark up utility costs before passing them through?
The lease controls this. Most leases permit pass-through of actual utility costs at cost, without markup. Some landlords add administrative fees or service charges to utility pass-throughs. These charges require explicit lease authorization. A markup without lease authorization is itself a recoverable overcharge.
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