Non-Cumulative CAM Cap
An annual cap on controllable CAM expenses that resets each year, limiting the year-over-year increase without allowing unused cap room to carry forward.
Model Lease Language Variations
“Controllable Operating Expenses for any calendar year shall not exceed one hundred five percent (105%) of the Controllable Operating Expenses for the immediately preceding calendar year.”
Year-over-year cap measured against prior year actuals, not base year. If expenses drop one year, the cap resets lower — but subsequent increases are measured from that lower base.
“Controllable Operating Expenses payable by Tenant shall not increase by more than five percent (5%) per annum over the Base Year Controllable Expenses.”
Non-cumulative annual cap measured against fixed base year. Simpler to administer. Maximum exposure in year 5 is base + 5% (not compounding).
“Controllable Expenses shall not increase by more than the greater of (i) three percent (3%) or (ii) the Consumer Price Index increase for the preceding twelve months, in each case measured from the Base Year. In no event shall such increase exceed five percent (5%) in any single year.”
CPI-indexed with floor and hard ceiling. Protects tenant in high-inflation years while ensuring landlord gets at least 3%. Non-cumulative prevents carry-forward.
Calculation Methodology
1. Establish base year (or prior year) controllable expense amount. 2. Calculate maximum permitted increase: base × cap percentage. 3. Add maximum increase to base to get cap ceiling. 4. Compare actual controllable expenses to cap ceiling. 5. Pass through lesser of actual or cap ceiling. 6. No carry-forward of unused cap room — each year stands alone.
Common Drafting Errors
Ambiguity over whether the cap measures against base year or prior year actuals — these produce very different results when expenses fluctuate
Not specifying what happens when actual expenses are below cap — does the tenant pay actuals or the cap amount?
Failing to address CPI adjustments to the base year — a fixed base with no inflation adjustment becomes increasingly unrealistic
Omitting treatment of capital expenditure amortization under the cap
Relevant Case Law
Tenant argued non-cumulative cap should apply to total expenses, not just controllable. Court held cap only applied to expenses defined as 'controllable' in the lease, excluding taxes and insurance.
Billing System Implications (Yardi / MRI)
In Yardi, non-cumulative caps are configured at the recovery pool level with annual reset. Common error: failing to reset the cap calculation annually, which effectively converts it to a cumulative cap. In MRI, ensure the Recovery Analysis cap type is set to 'Non-Cumulative' and verify the base year reference is correct in the lease abstract.
CapVeri Analysis
Non-cumulative caps are more tenant-friendly than cumulative caps. The key billing risk is misconfiguring the cap reference point — prior year vs. base year measurement produces significantly different results, especially in years where actual expenses dropped below the cap.
Related Resources
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