When your building sells, CAM charges can spike due to tax reassessments, cap resets, and new management fees. Learn what ownership transfers actually change, and what they cannot touch.
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Find My OverchargesSee a sample report firstBuildings change hands. When yours does, you may notice your CAM charges increase substantially in the year following the sale. Some of that increase is legitimate. Some is not. Knowing the difference protects your budget and your leverage in any dispute.
Three things commonly drive CAM spikes after ownership transfers:
Each requires different analysis.
In most US states, real property is assessed at the sale price when it changes hands. If a building sells for significantly more than its prior assessed value, the property tax bill can jump dramatically, and most commercial leases pass property taxes through to tenants as CAM or as a separate line item.
California's Proposition 13 system is the most widely known example. Properties are assessed at purchase price, then capped at 2% annual increases until the next sale. A building that sold for $10 million in 2005 but is now worth $30 million will be reassessed to $30 million upon sale, tripling the property tax basis.
At a 1.1% effective tax rate, the annual tax on that building goes from roughly $110,000 to $330,000, a $220,000 increase in the CAM pool.
On a 10% pro-rata share, your CAM increases by $22,000 per year from property taxes alone. That is before any management or operational changes.
In most cases, yes. Property tax pass-throughs are standard in NNN leases. If your lease passes taxes through to tenants, a reassessment after sale is a legitimate increase. The new owner did not manufacture the tax increase. The tax authority set the new assessed value based on the transaction.
What is worth checking:
Many commercial leases structure CAM caps based on a base year. If the cap is expressed as a percentage increase over the prior year, it does not reset at sale. But if the cap is based on an absolute dollar amount or a base year tied to the original lease commencement, a sale can trigger a reset, or the new owner may attempt one.
Common scenario: a cumulative CAM cap is based on Year 1 of the tenancy. After 5 years, the cap has accumulated meaningful protection. The building sells. The new owner argues that the cap should reset to the current year's actual costs as the new "base year."
This argument is generally incorrect unless the lease explicitly provides for a reset upon assignment or sale. The lease does not change when the building sells. Your tenant rights and the cap structure you negotiated transfer with the property.
If a new owner sends you an amendment proposing a cap reset, you do not have to sign it. Your existing lease terms control.
Some leases include a clause that gives the buyer or the tenant a recalculation right based on actual conditions at time of sale. These clauses are rare but can affect cap base calculations. Review your lease for language tied to "ownership transfer," "assignment," or "sale of the property" in the CAM or cap sections.
New owners typically replace property management. The incoming management company may charge different rates, use different billing structures, or add fees not charged by the prior manager.
What the new owner cannot do: charge management fees that violate your existing lease terms. If your lease caps management fees at 4% of controllable expenses, the new owner's 6% standard rate does not override your lease.
What to watch for:
New owners sometimes discover billing errors from the prior owner and attempt to correct them in the first post-sale reconciliation. "We found that you were undercharged in 2022 and 2023 and are correcting this now."
Your lease's audit rights window protects you here. If the window for disputing 2022 and 2023 charges has closed, the new owner generally cannot reopen those periods. The statute of limitations on prior reconciliations does not restart with a change in ownership.
A 40% spike usually indicates a significant property tax reassessment, particularly in states like California, Texas, or New York where assessments at sale are common. Review the property tax line item specifically. If taxes drove most of the increase, it may be legitimate. If the increase is spread across controllable expenses, that warrants a closer look.
Only if you are within your lease's audit window for those prior years. If the window has closed, the new owner cannot reopen prior periods. The change in ownership does not extend or reset your lease terms. Respond in writing, citing the audit rights provision and the window for each year.
New owners can establish their own administrative procedures going forward, but they cannot retroactively change terms that applied under the prior owner. If your lease gives you specific audit rights (right to inspect original invoices, right to use your own CPA), those rights do not change.
No, unless your lease contains specific language tying the base year to ownership. The base year was established at lease execution and does not reset upon sale. If the new owner argues otherwise, request the specific lease language they rely on.
Post-sale capital improvements are subject to the same rules as any other CapEx: your lease governs whether they can be amortized through CAM, and if so, under what conditions (life-safety, cost-saving, etc.). A new owner's renovation program does not automatically become a CAM recoverable item.
CAMAudit's detection engine flags year-over-year CAM spikes correlated with ownership transfer events and identifies property tax reassessment components in the reconciliation.
See also: Property Tax CAM Pass-Through, for detailed analysis of how taxes flow through CAM.
Related: CAM Increase Audit Guide | CAM Reconciliation Review Checklist
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