Your CAM exclusion list stops landlords from passing through executive salaries and CapEx. Here are 12 provisions to demand and what landlords accept.
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Find My OverchargesSee a sample report firstThe CAM exclusion list is the most important, least-read section of any commercial lease. Tenants spend hours negotiating base rent. They spend minutes, if that, reviewing the list of expenses their landlord is not allowed to charge them. That imbalance is expensive.
Without a negotiated exclusion list, a broadly written operating expense definition can include executive salaries, leasing commissions, mortgage interest, and capital improvements, all passed through at your pro-rata share. Whether the landlord exercises that right depends on the landlord. Whether you can dispute it depends entirely on your lease.
Here is what to demand, what you'll likely get, and what to do when the landlord pushes back.
Most landlord-form leases define operating expenses as something like:
"All costs and expenses incurred in connection with the operation, maintenance, management, insurance, and repair of the property, including but not limited to..."
That "including but not limited to" phrase is the danger. It signals that the list that follows is illustrative, not exhaustive. The landlord can include anything that falls within the broad definition. The only way to protect yourself is to explicitly carve out the items you don't want to pay.
CAMAudit's detection rules (Rule 2: Excluded Service Charges; Rule 12: Common Area Misclassification) exist precisely because tenants don't have exclusion lists, or have lists that are too narrow, or have lists that are ambiguous enough that landlords can work around them.
The negotiation is not complicated. It's a list. Get it in the lease before you sign.
The Building Owners and Managers Association (BOMA) publishes standard operating expense definitions used throughout the commercial real estate industry. BOMA's definitions explicitly exclude:
BOMA compliance is a credible baseline negotiating position. If a landlord objects to a specific exclusion you're requesting, ask whether the landlord is willing to define operating expenses using BOMA-standard definitions. Many institutional landlords already use BOMA language. If they won't, that tells you something.
This is the single most valuable exclusion to obtain. Capital improvements, by definition, extend the life or increase the value of the property. They are not routine operating costs. IRS Rev. Proc. 2019-43 provides guidance on capitalization thresholds, but the operative principle for lease purposes is useful life: any improvement with a useful life beyond the current year is capital.
Draft language to propose:
"Costs of capital improvements, capital replacements, capital expenditures, and capital repairs, including any costs that are capitalized under generally accepted accounting principles or that have a useful life in excess of one (1) year, whether incurred as a single expenditure or as part of a series of related expenditures."
Why the "series of related expenditures" language matters: landlords sometimes structure a single capital project as multiple smaller invoices to argue that each individually falls below a capitalization threshold. A well-drafted exclusion closes that loophole.
Property management fees as a percentage of gross revenues (typically 3-5%) are generally includable as an operating expense. What is not includable: the management company's corporate overhead, executive salaries, investor relations costs, marketing expenses for the management company's business, internal accounting systems, or any costs related to managing other properties.
The distinction is on-site versus off-site. A property manager physically overseeing your building is an operating cost. A regional VP reviewing quarterly reports from a corporate office is overhead.
Demand an exclusion for:
"Costs of the management company's corporate office, home office, or regional office overhead, including executive compensation, investor relations, corporate accounting, and any costs not directly attributable to on-site management of the property."
These are costs of leasing the building, not operating it. They benefit the landlord directly by generating revenue. Tenants have no legitimate obligation to fund the landlord's leasing operations.
The full exclusion should cover:
"Leasing commissions, brokerage commissions, finders' fees, tenant improvement allowances or costs, renovation costs for tenant buildouts, marketing and advertising costs for vacant space, and legal fees associated with lease negotiations."
If an expense is covered by insurance proceeds, condemned property awards, warranties, or specific reimbursements from other tenants, including it in the CAM pool means tenants pay twice for the same expense. The landlord collects the reimbursement and also collects from the tenant pool.
Draft: "Costs or expenses for which Landlord receives reimbursement from insurance proceeds, condemnation awards, warranties, or any other third-party source."
This also covers situations where a specific tenant causes damage and pays for repairs. That repair cost should not appear in the shared CAM pool.
Depreciation is an accounting entry, not a cash expense. Passing depreciation through to tenants as an operating expense would mean tenants are paying for the landlord's building purchase price amortized over decades. This is not standard. But some landlord-form leases are written broadly enough to permit it unless specifically excluded.
Debt service is the landlord's financing cost. It has no relationship to operating the building. Yet landlords who borrow to fund capital improvements sometimes attempt to pass through the financing costs as an operating expense rather than the capital improvement itself.
Demand explicit exclusion of: "Interest, principal, points, fees, and other costs associated with any mortgage, deed of trust, mezzanine loan, or other financing on the property or any portion thereof."
Legal fees incurred to operate the property (enforcing building rules, compliance matters, environmental issues) are arguably operating expenses. Legal fees incurred to lease space or collect delinquent rent from other tenants are not. Tenants should not subsidize the landlord's cost of filling vacant space or chasing deadbeat tenants.
Draft: "Legal fees and expenses incurred in connection with lease negotiations, lease enforcement actions against other tenants, collection of delinquent rent, and disputes with other tenants."
If the building has an existing ADA compliance issue, asbestos, lead paint, or other pre-existing deficiency, remediation is the landlord's problem. It is not an operating cost tenants should bear. Similarly, if local code changes require building upgrades, the cost of achieving code compliance for a pre-existing condition belongs to the landlord.
The exclusion should specify: "Costs of correcting pre-existing conditions, code violations existing prior to the lease commencement date, or structural deficiencies in the building."
This exclusion also protects against retroactive remediation costs: an asbestos abatement project that begins in year 4 of your lease but addresses conditions that existed before you arrived.
When the building has vacant suites, the landlord often maintains those spaces in a leasable condition (lighting, heating/cooling, cleaning for showings). Those costs serve the landlord's leasing goals, not the building's operating requirements. They should not be allocated to paying tenants.
If the landlord maintains an on-site management office, costs specific to that space (dedicated HVAC, cleaning, supplies) also should not appear in the shared pool.
If the landlord violates environmental regulations, fails an inspection, or is sued for negligence, the resulting fines and litigation costs are not operating expenses. They are consequences of the landlord's own actions.
Draft: "Fines, penalties, interest, or litigation costs arising from Landlord's failure to comply with applicable laws, regulations, or codes, or from Landlord's negligence or willful misconduct."
Property taxes on the real estate are an operating expense (usually passed through as a separate line item). Income taxes on the landlord's rental income, franchise taxes on the landlord's business entity, and estate or transfer taxes are not. They are the landlord's tax obligations as a business owner.
The distinction is entity-level taxes versus property-level taxes. Property-level taxes (real estate taxes, special assessments) are operating. Entity-level taxes are not.
This addresses what CAMAudit's Rule 12 (Common Area Misclassification) detects: expenses incurred for one tenant's exclusive benefit allocated across all tenants in the shared pool. A rooftop HVAC unit serving only one tenant's space, a dedicated loading dock improvement, upgraded electrical for a restaurant tenant, a specialized exhaust system for a medical tenant. These are single-tenant costs that belong outside the shared pool entirely.
The exclusion language: "Costs of services, improvements, or equipment that are provided exclusively for or that benefit primarily one tenant rather than the common areas or the building as a whole."
| Exclusion | Why Landlords Give This |
|---|---|
| Management company overhead | Standard in institutional leases already |
| Leasing commissions | Courts and industry norms support exclusion |
| Debt service | No legal basis to include it |
| Income and entity-level taxes | Not an operating cost by any reasonable definition |
| Legal fees for leasing/rent collection | BOMA excludes these; most landlords accept |
| Exclusion | Landlord's Counter |
|---|---|
| Capital improvements | Landlords want "routine capital" to be includable |
| Depreciation | Landlords argue amortized capital is different from straight depreciation |
| Pre-existing condition costs | Landlords want narrow definition of "pre-existing" |
| Vacant space costs | Landlords argue these are necessary building operating costs |
| Exclusion | Landlord's Position |
|---|---|
| Right to amortize capital over useful life | Landlords view amortization as a compromise, not an exclusion |
| Broad catch-all exclusion language | Threatens landlord's flexibility to include unanticipated costs |
On capital improvements, the realistic negotiated outcome is not a blanket exclusion. It's an amortization limit. Instead of banning capital from the pool entirely, the lease allows capital improvements "reasonably necessary for the operation or safety of the building" to be amortized over their useful life. Only the annual amortized portion passes through to tenants.
This is a legitimate compromise. A $200,000 roof replacement with a 20-year useful life becomes $10,000/year rather than a one-time $200,000 charge. At a 10% pro-rata share, the tenant's annual cost is $1,000 rather than $20,000. That's manageable. The $20,000 lump-sum charge in a single year is not.
If you accept amortization as the compromise position on capital, make sure the lease specifies:
Three specific lease constructions undermine an otherwise good exclusion list:
"Including but not limited to" in the operating expense definition. This phrase signals the inclusion list is illustrative, not exhaustive. The exclusion list you negotiate limits what is excluded from a pool that could theoretically include anything. Propose replacing "including but not limited to" with "including only the following categories."
"As determined by Landlord in its reasonable judgment" attached to any cost category. This grants discretion to include borderline items. Your exclusion list should not have carve-backs that restore landlord discretion over excluded items.
"And all other costs reasonably incurred in connection with the property." This catch-all extends the operating expense pool beyond any specific list. Strike it. Replace it with "and no other costs."
If you already have a lease with a weak exclusion list, you have one structured opportunity to fix it: renewal. Renewal negotiations are the only time in a lease relationship when both parties have meaningful leverage. Landlords want the certainty of a long-term tenant. Tenants want the certainty of a known location.
Before renewal negotiations begin, commission a forensic audit of the prior term. CAMAudit runs at $79 flat, versus $2,000+ upfront plus a 33% contingency for traditional audit firms. If the audit finds systematic overcharges that trace back to gaps in the exclusion list, you have both a dispute claim and a structural argument for renewal.
The framing: "We've identified $X in charges over the prior term that we believe shouldn't have been in the pool. Before we sign another 7 years under the same language, we'd like to reconcile the prior term and add a few provisions that would prevent these disputes from recurring."
That is a landlord-friendly way to ask for a materially better exclusion list.
What if my current lease has a short exclusion list? Can I still dispute charges?
Yes, but the dispute is harder. Without an explicit exclusion, you must argue that the expense falls outside the operating expense definition as written, or that it violates an implied standard (BOMA, industry practice). Disputes based on an implied standard are winnable but require more documentation. CAMAudit identifies the specific charges most vulnerable to challenge even under a weak exclusion framework.
Can I negotiate exclusion list changes at renewal?
Renewal is exactly when to negotiate. You are signing a new agreement or amendment. Changes to the exclusion list are structural lease modifications, fully negotiable at renewal. Many tenants who couldn't get a strong exclusion list at original signing are able to negotiate material improvements at renewal, especially if they have audit documentation showing the prior term's overcharges.
How specific do exclusions need to be?
Specific enough that a landlord cannot argue ambiguity. "Capital improvements" is good. "Capital improvements, including costs that would be capitalized under GAAP or that have a useful life in excess of one year, whether characterized by Landlord as maintenance, repair, or otherwise" is better. The specificity forecloses the argument that a $180,000 parking lot overlay is really "maintenance" because the landlord's accountant coded it that way.
What if the landlord refuses to negotiate the exclusion list?
Landlords at smaller, local properties are more likely to refuse. Institutional landlords (REITs, large private owners) typically have standard forms that already incorporate most of the exclusions above. A landlord who refuses to include standard BOMA exclusions is telling you something about how they operate the property. Factor that into your decision.
Does excluding something from the CAM pool mean the landlord pays for it?
Yes. Exclusions shift the cost to the landlord. The landlord will try to price this into the base rent, often arguing that exclusions justify a higher rent. That tradeoff is real but calculable. A $0.50/SF rent increase costs you $5,000/year on a 10,000 SF lease. If the exclusions you're adding prevent $15,000/year in improper charges, the math favors accepting a modest rent premium for a strong exclusion list.
For more negotiation guides, clause breakdowns, and sample lease language, see all lease language resources.
This article is for informational purposes only and does not constitute legal advice. CAM lease terms vary by jurisdiction and individual lease language. Consult a qualified commercial real estate attorney for advice specific to your lease and situation.
What should be excluded from CAM charges in a commercial lease?
The most valuable exclusions to negotiate are: capital improvements with useful lives exceeding one year, management company overhead not related to on-site operations, leasing commissions and tenant improvement allowances, costs reimbursed by insurance or warranties, depreciation, mortgage interest, legal fees for lease negotiations, and costs providing exclusive benefit to a single tenant.
Can I negotiate CAM exclusions in an existing lease at renewal?
Renewal is exactly when to negotiate exclusion list changes. You are signing a new agreement or amendment, making structural lease modifications fully available as negotiating points. If you have audit documentation showing prior-term overcharges that trace to gaps in the exclusion list, you have both a dispute claim and a structural argument for better exclusion language.
What is the danger of including but not limited to language in a CAM definition?
That phrase signals the inclusion list is illustrative, not exhaustive. The landlord can include anything that falls within the broad operating expense definition. Your exclusion list limits what is carved out from a pool that could theoretically include anything, which is why the exclusion list is the only real protection. Propose replacing this language with including only the following categories.
What will landlords usually concede on a CAM exclusion list?
Institutional landlords typically concede management company overhead, leasing commissions, debt service, entity-level taxes, and legal fees for leasing and rent collection, because these are already excluded in BOMA-standard definitions used in most professional lease forms. The harder fights are on capital improvements, depreciation, and vacant space costs.
What is the amortization compromise on capital improvements in CAM?
Rather than a blanket exclusion of capital, the realistic outcome is an amortization limit: capital improvements reasonably necessary for building operation or safety can be amortized over their IRS-guideline useful life, with only the annual amortized portion passing through to tenants. Insist that useful life is determined by IRS guidelines (not landlord discretion), interest on financing is excluded, and the annual amount (not the full project cost) enters the CAM pool.
