Who is responsible for CAM charges on subleased space?

The master tenant remains liable to the landlord under the master lease for all CAM charges on the full leased space. The subtenant owes CAM to the master tenant under the sublease. If the subtenant fails to pay, the master tenant still owes the landlord. The two sets of obligations run independently under separate contracts.

Can a master tenant charge me more CAM than the landlord charges them?

No, unless the sublease explicitly authorizes a markup. The master tenant cannot profit on CAM pass-throughs without contractual authorization. If you are a subtenant and the master tenant is billing more than their proportionate share for your portion of the space, request the underlying reconciliation to compare.

What CAM charges can a subtenant dispute?

Subtenants can challenge: allocations exceeding their pro-rata share of the master lease space, charges excluded under the master lease (those exclusions pass down), unauthorized management fees added by the master tenant, and reconciliations from the master tenant that differ from the actual reconciliation from the landlord.

How do I get the underlying CAM reconciliation as a subtenant?

Request it specifically in your sublease. Negotiate language requiring the master tenant to provide a copy of the annual reconciliation from the landlord within 30 days of receipt. Without this provision, you are relying on the master tenant to pass through charges accurately with no independent verification right.

What happens to my CAM obligations if the master tenant goes bankrupt?

This depends on whether your sublease includes a subordination, non-disturbance, and attornment (SNDA) agreement. With an SNDA, you may have the right to attorn directly to the landlord. Without one, the bankruptcy court may terminate the master lease, potentially affecting your occupancy and CAM obligations. Consult a commercial real estate attorney if this situation arises.

CAM Charges on Subleased Space: Master Lease vs. Sublease Obligations | CAMAudit

CAM Charges on Subleased Space: How the Master Lease and Sublease Interact

When a tenant subleases part or all of their space, the CAM obligation does not disappear. It splits, layers, and sometimes multiplies. The master tenant (sublandlord) remains liable to the landlord under the master lease. The subtenant owes the master tenant under the sublease. If either party fails to account for this structure correctly, someone pays too much.

Understanding which lease governs which obligation is the starting point for any CAM dispute in a sublease context.

The Two-Layer Structure

In a sublease, there are at least three parties:

Landlord: owns the building, is party to the master lease
Master tenant (sublandlord): holds the master lease, has subleased part or all of the space
Subtenant: occupies the subleased space under a sublease agreement with the master tenant

The master tenant has a direct contractual relationship with the landlord. The subtenant has a contractual relationship only with the master tenant, not with the landlord (unless there is a subordination, non-disturbance, and attornment agreement, or SNDA).

This means:

CAM obligations flow from landlord to master tenant under the master lease terms
CAM obligations flow from master tenant to subtenant under the sublease terms
The two sets of obligations may differ substantially

How CAM Pass-Through Works in Subleases

The master tenant typically passes some or all CAM obligations through to the subtenant. How this works depends on the sublease language.

Full pass-through: The subtenant pays a pro-rata share of all CAM the master tenant owes. If the master tenant occupies 40,000 sq ft and the subtenant takes 10,000 sq ft, the subtenant pays 25% of the master tenant's CAM bill.

Negotiated flat amount: Some subleases specify a fixed monthly CAM payment that does not change with actual expenses. This is the flat CAM structure applied to a sublease, and it works the same way as fixed CAM in a direct lease.

Gross sublease: Some subleases include all occupancy costs (rent, CAM, taxes, insurance) in a single monthly payment. The master tenant bears the variability risk.

The critical issue: what the master tenant passes through to the subtenant cannot exceed what the master tenant actually owes to the landlord for that space. The master tenant cannot profit on CAM pass-throughs unless the sublease explicitly authorizes it.

What the Subtenant Can and Cannot Challenge

The subtenant can challenge:

Calculations that allocate more CAM to the subtenant than their pro-rata share of the master lease space
Charges that the master lease itself excludes from CAM (the exclusions in the master lease pass down)
A management fee charged by the master tenant acting as sublandlord that has no basis in the sublease
Year-end reconciliations from the master tenant that differ from the actual reconciliation from the landlord

What the subtenant usually cannot challenge:

Line items that the master tenant legitimately owes to the landlord and is properly passing through
The master lease's dispute window. The subtenant's rights are governed by the sublease's provisions.

The subtenant's audit rights: Most subleases do not include detailed audit rights. If the subtenant wants to verify the underlying reconciliation, they need to either (a) negotiate specific audit rights in the sublease, or (b) request that the master tenant share the underlying reconciliation documentation.

Master Tenant's Exposure

The master tenant sits in the middle and has obligations in both directions. Several issues arise:

Double recovery risk: If the master tenant charges the subtenant CAM based on a gross reconciliation from the landlord, and then also disputes the reconciliation and receives a credit, the master tenant has collected more than they owed. A well-drafted sublease requires the master tenant to pass through any credits proportionally.

Responsibility for disputes: When a CAM error exists in the master lease, the master tenant is responsible for pursuing it. But subtenants can push master tenants to dispute charges, particularly when the amounts are significant.

Gap period between master lease and sublease: If the master lease covers a 10-year period and the sublease only covers 3 years, the subtenant does not owe CAM for the remaining 7 years. But the master tenant still owes the landlord for the full period.

Dollar Example

Master tenant holds 20,000 sq ft in a 100,000 sq ft building. Pro-rata share: 20%. Annual building CAM pool: $500,000. Master tenant's annual CAM bill: $100,000.

Subtenant leases 5,000 sq ft from the master tenant. Sublease allocates 25% of master tenant's CAM to subtenant.

Subtenant annual CAM: $100,000 x 25% = $25,000.

Problem scenario: Landlord's reconciliation includes $20,000 in tenant improvement costs for a vacant suite (excluded under the master lease). Master tenant passes full $100,000 to subtenant proportionally, including the improper $20,000.

Subtenant overpays: $20,000 x 25% = $5,000 that should have been excluded.

If the master tenant successfully disputes the $20,000 with the landlord, their credit is $20,000 x 20% = $4,000. The subtenant should receive: $4,000 x 25% = $1,000 credit on their reconciliation.

What Documentation the Subtenant Should Request

The relevant portions of the master lease covering CAM obligations, exclusions, and audit rights
The annual reconciliation from the landlord (or a certified copy)
The master tenant's pass-through calculation showing how charges were allocated to the sublease
Any credits or adjustments received by the master tenant from the landlord
The sublease's CAM provisions and any amendments

What tenants ask about CAM on subleased space

I am a subtenant and the master tenant is charging me more CAM than what the landlord billed for our portion of the space. Is that allowed?

No, unless the sublease explicitly authorizes a markup. The master tenant cannot profit on CAM pass-throughs without contractual authorization. Review the sublease for language about CAM billing and request the underlying reconciliation to compare.

My master tenant went bankrupt. Do I now owe CAM directly to the landlord?

If your sublease included an SNDA (subordination, non-disturbance, and attornment agreement), you may have the right to attorn directly to the landlord. Without an SNDA, the bankruptcy court may terminate the master lease, potentially affecting your occupancy rights. This is a situation that requires legal counsel, but CAM obligations after a bankruptcy will depend on the outcome of the bankruptcy proceedings.

The landlord wants to deal with me directly instead of through the master tenant. Can they do that?

Generally no, without your consent and the master tenant's involvement. The privity of contract runs from the landlord to the master tenant. You are not in direct privity with the landlord unless there is an SNDA or the master lease terminates.

Only if your sublease requires it. Negotiate this right explicitly: "Sublandlord shall provide Subtenant with a copy of the annual reconciliation statement from Landlord within 30 days of receipt." Without this, you are relying on the master tenant to pass through charges accurately.

What happens to my CAM obligations if the master lease ends before my sublease?

The sublease is contingent on the master lease. If the master lease terminates early, the sublease typically terminates with it (unless there is an SNDA). Your CAM obligations end with the sublease. If the landlord and master tenant enter a lease termination agreement, the timing and impact on your tenancy depend on the specific terms.

CAMAudit's detection engine analyzes subleased space scenarios and computes the appropriate pro-rata allocation from the master lease down to the sublease level.

See also: Pro-Rata Share in Commercial Leases, for the calculation framework that governs how CAM is divided among tenants.

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