commercial real estate · Malls · Office Properties · Retail leases · Shopping Center

Property Management Systems Can’t Handle This Clause – And if you have them, they will be critical for 2020

We have been seeing a clause for years that is both brilliant and fair to both landlords and tenants – a CAM cap carryforward. The concept is fairly simple. You calculate and apply a cap as required by the lease. However, if there is any excess CAM that the landlord could not bill and collect because of the cap, the landlord can carry that excess forward and bill it if the tenant’s share of CAM in a future year is less than that current year’s cap. (And, as we have addressed in previous blogs, we have to be aware of whether the lease addressed the cap as cumulative or non-cumulative.) Here is an example of what this could mean for 2020 and beyond:

As the example points out, with a CAM cap carryforward, we may be able to pick up amounts not previously billed. And, perhaps even more importantly in the case of a non-cumulative cap, we may be able to prevent the reset to a much lower cap for future years.

This carryforward language is not uncommon. I would venture to say that it exists in about 15% of leases that have cap language. However, it is very landlord-specific, meaning there are numerous landlords out there that use this language while the majority do not. If you are a landlord that does not use this language, keep in mind that it may exist in properties that you have acquired over the years.

And, that blog title, “Property Management Systems Can’t Handle This Clause”? It is true that this is a brilliant, fair clause. However, we have not encountered a “stock” property management system that can handle this clause – tracking the carryforward and applying the carryforward. Please share if yours does.

But, for 2020, and the value of your portfolio, it is worth starting the search and prepping the manual calculations now.

One thought on “Property Management Systems Can’t Handle This Clause – And if you have them, they will be critical for 2020

  1. Hi Jack,
    Enjoyed reading your blog. Not only do we have CAM cap carryforward functionality built into our enterprise grade SaaS REMone for Commercial Real Estate Management suite, with our no-code development PaaS we empower each of our customers with the ability to design, build, test, and deploy their own unique CAM calculations. Now business subject matter experts can work hand in hand with IT to drive innovation and digital transformation by fostering a no-code developer community. Customizations are no longer a dirty word because they will be automatically merged with each new upgrade and release. We’d be happy to show you how we do this.

    Like

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