Office Lease tenants face specific billing risks tied to how expenses are allocated and reconciled. The most common error appears in the section below. CAMAudit runs 14 forensic detection rules on your reconciliation statement to identify every recoverable dollar.
Improper gross-up of fixed expenses, property taxes and insurance premiums are included in the gross-up calculation despite being fixed costs that do not vary with occupancy. This error lowers the effective base year stop (because the grossed-up base year is overstated) and inflates every subsequent year's escalation charge. For large office tenants, this error can generate tens of thousands of dollars in annual overcharges.
A commercial lease structure used for multi-tenant office buildings, typically structured as a Full Service Gross (FSG) lease with Base Year expense stops, though some office markets (particularly suburban) use modified gross or NNN structures. Office leases in Class A high-rise buildings in gateway markets (New York, San Francisco, Chicago) are almost universally FSG with base year mechanics.
Base year: landlord covers all operating expenses bundled into rent. Years 2+: tenant pays pro-rata share of operating expenses exceeding the base year stop, often called "escalation rent" or "operating expense contributions." Escalation categories typically include: utilities, janitorial, management, maintenance, insurance, and property taxes.
Operating expense escalations are billed annually after year-end. The landlord compares actual total operating expenses to the base year stop (grossed up to 95% occupancy) and bills each tenant their pro-rata share of the excess. The gross-up calculation is the most technically complex and audit-significant element, only variable expenses should be adjusted.
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Identify and segregate fixed vs. variable operating expenses in the landlord's expense schedule. Confirm the gross-up is applied only to variable expenses (utilities, janitorial, maintenance). Verify that the base year was a "normal" operating year, not a construction year, major vacancy year, or landlord concession year that would create an artificially low stop. Review after-hours HVAC billing to ensure costs reflect actual utility expenses.
Upload two PDFs. 14 detection rules. Under 15 minutes. Free.
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