There are several documents relating to office building CAM costs and other operating expenses that can show you whether additional rent will end up wreaking havoc on your cash flow when it’s too late—after you’ve signed a lease. If you ask the landlord why it didn’t disclose those costs to you when you negotiated the lease, the owner may simply respond: “Because you didn’t ask about them.” Try to get and review the following five types of key documents before you proceed with lease negotiations. Corporate Realty Advisors does this as a matter of routine.
Document #1: Expense schedule.
Expense schedules typically break down the expenses by category—such as cleaning costs, energy, and insurance. A landlord generally prepares an expense schedule annually and then sends it to tenants after the end of each fiscal year. You should request expense schedules covering the past several years. They will help you determine what—and how much—was charged. Since there are well-established norms for each category of expenses, an expense schedule is a good indicator of whether the building is being managed properly. (High expenses can be a sign of mismanagement, but bear in mind that energy and insurance costs have risen dramatically over the past few years.) If you are dealing with a new building, review a budget of its projected CAM costs and operating expenses, including real estate taxes.
Document #2: Historical operating expense/CAM cost data.
Try to review all underlying financial information…