CAM Exclusion List: Complete Guide to Non-Recoverable Expenses
Every commercial lease permits tenants to pay their share of property operating expenses — but every commercial lease also limits which expenses qualify. The exclusion list defines the boundary between what landlords can recover and what they must absorb.
Including an excluded item in a CAM pool — even unintentionally — creates immediate legal exposure. When discovered, the landlord owes a credit or refund of the tenant's share, plus potential attorney's fees if the tenant pursues the dispute. Proactive exclusion compliance is significantly cheaper than reactive remediation.
Why Exclusion Lists Exist
Exclusion lists exist because CAM pass-through, without limits, would allow landlords to recover virtually any building-related cost from tenants — including the landlord's investment costs, overhead, and profit.
Tenants use exclusion lists to:
- Prevent landlords from passing through financing costs for the property acquisition
- Prevent depreciation on building assets from inflating operating expenses
- Prevent capital improvements (which increase property value) from appearing as operating expenses
- Prevent non-property costs (costs from other buildings, corporate overhead) from being allocated to the property
- Limit management fee recovery to market rates
From a landlord's perspective, understanding the exclusion list helps you build a clean CAM pool — one that passes tenant audit scrutiny — rather than discovering excluded items after a three-year overpayment.
Standard BOMA Exclusions
The Building Owners and Managers Association (BOMA) has published standard CAM exclusion language that is widely referenced in commercial lease negotiations. Standard BOMA exclusions include:
Capital improvements. Costs that are capital in nature — creating new assets, substantially upgrading existing ones, or extending useful life — are excluded from CAM. This is the largest and most frequently disputed exclusion category. See our separate guide on CapEx in CAM for the full treatment.
Ground lease payments. Rent paid by the landlord on a ground lease for the property is a landlord financing cost, not an operating expense.
Debt service and financing costs. Mortgage payments, loan origination fees, interest on building debt, and financing costs for improvements — none of these are recoverable through CAM.
Depreciation. Accounting depreciation on building assets is not a cash operating expense and is explicitly excluded.
Leasing commissions. Commissions paid to brokers for tenant leasing are landlord costs not recoverable through CAM.
Legal fees related to leasing. Attorney's fees for lease negotiation, lease disputes, or tenant-related legal matters are excluded (legal fees for operating matters like vendor contracts may be included).
Costs of other properties. Expenses from other buildings in the landlord's portfolio — even if managed by the same company — are excluded.
Lease-Specific Exclusions
Standard BOMA exclusions are a floor, not a ceiling. Sophisticated tenants negotiate additional exclusions specific to their circumstances. Common lease-specific exclusions include:
Above-market management fees. Many leases specify that management fees are recoverable only to the extent they're at or below market rate for comparable properties.
Costs to correct construction defects. Repairs necessitated by faulty construction or design defects — especially in new buildings — are often excluded from CAM for a specified period (typically 3–5 years after delivery).
Charitable contributions. Landlord donations to community organizations, regardless of how they're positioned, are excluded.
Art and entertainment costs. Building lobbies sometimes have art installations or public events whose costs landlords attempt to pass through. Most leases exclude these.
Tenant work-letter and improvement allowance costs. Costs associated with building out individual tenant spaces are excluded.
Costs attributable to above-standard services. If the landlord provides a specific tenant with above-standard cleaning, HVAC hours, or other services, that incremental cost should not be pooled.
Capital Expenditure Exclusions
Capital expenditures deserve special attention because they're the most frequently challenged exclusion. The general principle: costs that create new assets, substantially upgrade existing ones, or materially extend their useful life are capital — not operating — and belong on the balance sheet, not in the CAM pool.
The key distinction is between:
- Repairs (restoring existing functionality) — operating expense, CAM-recoverable
- Capital improvements (creating, upgrading, or substantially extending) — capital, not directly CAM-recoverable
When CapEx is recoverable at all (see our CapEx guide for exceptions), only the amortized annual portion can appear in the CAM pool — never the lump-sum capital cost.
Common items that landlords incorrectly classify as operating expenses:
- Full HVAC system replacement (capital, not a repair)
- Full roof replacement (capital, not maintenance)
- Complete parking lot reconstruction (capital, not resurfacing)
- Elevator modernization (capital, not maintenance)
Landlord-Specific Expenses
These expense categories are inherently landlord costs and are excluded from CAM regardless of lease language:
Income taxes. The landlord's income tax obligations on rental income are not operating expenses of the property.
Executive and corporate salaries. Compensation for landlord corporate executives, even those with oversight of the property, is not a property operating expense. On-site property management staff compensation may be recoverable; corporate overhead is not.
Costs for vacant space buildout. Tenant improvement costs for vacant suites being prepared for new tenants are excluded.
Landlord entity overhead. Accounting fees, corporate insurance, legal retainers, and administrative costs of the landlord entity — separate from property-specific management — are excluded.
Management Fee Caps and Exclusions
Even when management fees are recoverable, most leases limit recovery:
- Percentage cap: Management fees cannot exceed X% of gross revenues (typically 4–6%)
- Market rate requirement: Affiliated management company fees must not exceed arm's-length market rates
- Fixed fee cap: Some leases cap management fee recovery at a specific dollar amount per year
If your lease has a management fee cap, verify that the management fee in your CAM pool doesn't exceed it. The excess is an excluded amount.
How to Audit Your CAM Pool Against the Exclusion List
A systematic exclusion audit:
- Export the full GL detail for the CAM pool for the year being reconciled
- Categorize each line item into primary expense categories
- Flag high-risk categories — any payments over $25,000 to vendors not in routine vendor history, any payments to related parties, any payments to attorneys or consultants
- Cross-reference against the lease exclusion list for each tenant (exclusions vary by lease)
- Document your analysis for each flagged item — why it's included (or excluded) and which lease provision applies
This audit should happen before reconciliation statements are issued, not after a tenant audit request arrives.
What Happens When Excluded Items Are Discovered
If a tenant or their auditor identifies an excluded item after reconciliation statements have been issued:
- Verify the finding — review the specific item, the lease exclusion language, and your classification rationale
- Calculate the credit — the tenant's pro-rata share of the excluded amount for each year it appeared (within the audit window)
- Issue a formal credit memo or amended reconciliation statement
- Review all other tenants' pools — if the item was excluded for one tenant, verify whether the same item should be excluded for others
The audit window in most leases is 3 years after the reconciliation statement is issued. For an excluded item discovered in year 3, the credit covers year 1, year 2, and year 3 — potentially significant.