CAM Charges for Childcare Franchise Locations
Childcare franchise locations have a cost profile that does not fit neatly into the standard strip-center tenant template. The combination of larger footprints, high-value real estate, specialized outdoor spaces, and intensive parking use creates CAM and NNN exposure that many operators underestimate when they sign the lease and again when reconciliations arrive.
This guide covers the main CAM issues specific to childcare franchise operators: The Learning Experience, Primrose Schools, KinderCare-style concepts, and similar brands that lease buildings in the 6,000 to 12,000 square foot range.
Property Tax Reassessment and What It Does to Your True-Up
In a NNN lease, real estate taxes pass through directly to the tenant. For most retail tenants, taxes rise gradually in line with assessed value trends. For childcare locations on high-value standalone parcels, there is an additional trigger: property reassessment.
When the property sells, many jurisdictions reassess to market value. A childcare facility that opened on a parcel assessed at $1.2 million in 2021 but sold as part of a portfolio in 2024 for an implied land value of $2.1 million may see assessed value jump the following tax year. In a NNN lease, that increase flows directly into your reconciliation.
What to check: Compare your tax pass-through from the current reconciliation to the prior year. A jump of more than 10% to 15% without a corresponding public record (sale, improvement permit) is worth investigating. Request the actual tax bill from the landlord. In some jurisdictions, tenant tax bills are public record and you can verify independently.
The CAMAudit detection rule for tax overallocation flags when the tax pass-through calculation uses a denominator inconsistent with the lease definition or applies a rate to a base that includes excluded areas.
Insurance Pass-Throughs for Childcare-Specific Coverage
Childcare facilities create insurance considerations that differ from standard retail tenants. Landlords may carry enhanced liability coverage, specific use riders, or higher property insurance rates tied to the childcare occupancy classification. Some of those costs are legitimate NNN pass-throughs. Some are not.
What is legitimate: the landlord's base property insurance policy on the building and common areas. An increase in the property insurance rate due to market conditions affecting the whole portfolio is generally a pass-through.
What to scrutinize: Insurance add-ons that are specific to your tenancy type rather than property-wide coverage. If the landlord's insurer charges a premium because there is a childcare tenant in the building, and that premium is being passed through in the shared CAM pool — including to other tenants — the allocation is questionable. If it is billed only to you as a separate line item, check whether your lease authorizes that specific charge.
Also check for insurance on the management company itself billed as property insurance. Management errors and omissions or corporate liability insurance for the property management firm should not appear in your NNN pass-through.
Parking Lot Allocation When Parents Drive High Traffic
A childcare location in a shared strip center generates distinct parking traffic patterns: dual peak periods in the morning (drop-off) and evening (pickup), concentrated in a short time window. The parking lot takes meaningful wear from this pattern.
Parking lot maintenance is a legitimate CAM expense. The question is allocation. If your lease defines your pro-rata share based on your square footage divided by total building square footage, that is the number. Heavy use from your customer base does not entitle the landlord to assign you a higher pro-rata percentage than the lease specifies.
Where this gets complicated: some landlords bill childcare tenants for parking lot line striping, pothole repair, or sealcoating by claiming the work was done primarily to support the childcare space. That is not how NNN works. Shared area maintenance costs are pooled and allocated by formula, not by usage attribution.
If you see line items in your reconciliation labeled in a way that suggests they are childcare-specific rather than center-wide, compare them to the CAM pool definition in your lease. Costs specific to your premises belong in your operating expenses, not the shared CAM pool, but they are also not your share of the pool twice.
Outdoor Play Area: Exclusive Use vs. Common Area
Most childcare franchise leases designate the outdoor play area as exclusive-use leased premises. If that is how your lease is written, the play area is part of your demised space and its maintenance is your responsibility, not part of the common area maintenance pool.
The problem arises when:
- The play area is adjacent to a common walkway or parking lot, and the landlord includes fencing, surface maintenance, or drainage work in the CAM pool
- The lease is ambiguous about whether the outdoor area is part of the leased premises or a licensed exclusive area
- The play area abuts a fire lane or emergency access that the landlord maintains, and that maintenance cost is being allocated back through CAM
Walk through the lease exhibit that defines your premises boundaries. If the outdoor play area is hatched as part of your demised premises, its maintenance falls outside the CAM pool. If the landlord is billing exterior fencing repairs or drainage work as CAM line items, and those items serve only your play area, the billing is probably wrong.
Management Fee Applied to an Inflated Base
The management fee overcharge is the most common error across all commercial tenant types. For childcare franchises, the risk is slightly elevated because the properties often have professional property management firms handling larger portfolios where fee structures are standardized but lease-specific caps vary.
Standard management fee structures run 3% to 5% of some base. The lease defines both the percentage and the base. A lease that caps the fee at 4% of controllable CAM expenses becomes a problem when the property manager applies the 4% to total gross revenues from the property.
Example: Controllable CAM expenses are $220,000 for the year. Your lease caps the management fee at 4% of controllable expenses, which would be $8,800. The property manager applies 4% to gross building revenues of $1.4 million, producing a fee of $56,000 allocated across the pool. Your 8% pro-rata share of the difference between the correct and billed fee is $3,776 in a single reconciliation year.
Check your management fee line against both the cap percentage and the base in your lease before paying the true-up.
What to Do Before Your Next True-Up Arrives
Request your lease abstract or pull the relevant sections yourself: CAM definition, operating expense definition, excluded items, management fee cap, pro-rata share calculation, and the audit rights clause. Then pull the most recent reconciliation statement and check each line against what the lease allows.
The specific items to verify for a childcare location:
- Property tax pass-through: request the actual tax bill and verify the math
- Insurance line: confirm it is property insurance, not management company coverage
- Management fee: verify the cap percentage and the base it applies to
- Outdoor area maintenance: confirm any maintenance items serve common areas, not your exclusive use space
- Pro-rata percentage: verify the denominator matches the lease definition
Upload your reconciliation and lease to CAMAudit and the tool runs all 14 detection rules automatically, flagging discrepancies against the lease provisions so you know what to look at before you decide whether to dispute.