Texas CAM Compliance: What Landlords Must Know About Disclosure Requirements and Dispute Risk

Texas is the second-largest commercial real estate market in the United States by transaction volume, trailing only New York. The DFW and Houston metro areas alone contain more than 900 million square feet of commercial space. Despite that scale, Texas has no commercial tenant protection act equivalent to California's SB 1103 and no comprehensive CAM disclosure statute. Commercial leases in Texas are governed primarily by contract law and a narrow provision of the Texas Property Code.

Understanding what the law requires — and what it does not — is essential for landlords who want defensible CAM practices in the Texas market.

Texas Property Code §93.012: The Core Disclosure Requirement

Texas Property Code §93.012 is the primary statutory provision governing commercial lease charges. The section requires that:

• Any charges in addition to base rent — including CAM, administrative fees, and management fees — must be disclosed in the lease
• The calculation method for those charges must be described in the lease
• A landlord cannot charge using a methodology not authorized by the written lease terms

This is not a detailed regulatory framework. It is a single, foundational rule: if it is not in the lease, it is not enforceable.

The practical implication is significant. A landlord who calculates management fees as a percentage of gross revenues — when the lease specifies a percentage of recoverable CAM expenses — is potentially charging an amount that §93.012 renders unenforceable. A tenant whose lease is silent on administrative markups has a strong argument that any markup on vendor invoices is not a valid CAM charge.

What §93.012 does not do:

• It does not specify what can or cannot be included in CAM
• It does not set a timeline for reconciliation statement delivery
• It does not grant tenants any right to inspect records
• It does not impose penalties for overcharging

What Texas Does Not Have

Texas landlords who operate in states with more prescriptive CAM statutes should understand the gaps in Texas law:

No statutory audit rights. A California commercial tenant has a statutory right under SB 1103 to request supporting documentation. A Texas commercial tenant has only what their lease grants. If the lease has no audit clause, the tenant's only recourse is litigation.

No mandatory statement delivery timeline. California SB 1103 requires delivery within 90 days of fiscal year close. Texas has no equivalent. The deadline is whatever the lease says — and if the lease is silent, there is no statutory deadline at all.

No commercial rent increase notice requirements. Texas does not require advance notice for CAM estimate increases. Landlords can adjust monthly estimates mid-year consistent with the lease terms without statutory notice periods.

No documentation production timeline. Once a tenant in California requests CAM documentation, the landlord has a statutory response period. Texas landlords face no equivalent statutory clock — response obligations come from the lease, if at all.

Texas-Specific CAM Risk Factors

1. Management Fee Methodology Not in the Lease

This is the most common §93.012 violation in Texas commercial portfolios. Management fee provisions frequently state "3% management fee" without specifying the base. The controller applies it to gross revenues from the property (including base rent, percentage rent, and parking income). The lease only authorizes a fee calculated on recoverable CAM expenses.

The resulting overcharge can be substantial. On a property with $2M in gross revenues and $400K in recoverable CAM expenses, the difference between "3% of gross revenues" and "3% of recoverable expenses" is $48,000 per year — distributed across tenants.

2. Undisclosed Administrative Markups on Vendor Invoices

Some property management firms apply a 10 to 15 percent administrative markup to vendor invoices before passing costs through as CAM. If the lease does not explicitly authorize this markup, it is not a valid CAM charge under §93.012.

The markup is sometimes disclosed in the management agreement between the property owner and the property manager — but not in the tenant's lease. The management agreement is not the operative contract for CAM purposes. The tenant's lease is.

3. No Audit Rights Clause — Exposure in Both Directions

A lease with no audit rights clause gives the tenant no contractual right to inspect records. This may seem like a landlord advantage — but it is not.

When a tenant cannot audit the records, they cannot verify charges are correct. When charges turn out to be incorrect (as they are in 40% of audited reconciliations), the tenant discovers the error through litigation, not through an audit. Litigation is more expensive, more adversarial, and creates a public record. A landlord with no audit rights clause has no structured mechanism to limit the scope of discovery.

Standard institutional practice: include an audit rights clause with a 60-day notice requirement, a 12-month lookback period, and a requirement that the tenant use a CPA. This gives tenants a controlled channel for disputes and limits litigation exposure.

Texas Market Characteristics That Affect CAM

Property Tax Protests in Harris County and Tarrant County

Property tax protests are standard practice in Harris County (Houston) and Tarrant County (DFW). Commercial property owners who protest successfully can reduce taxable value by 10 to 30 percent — which reduces the property tax component of CAM materially.

The CAM accounting implication: when a property tax protest succeeds after the reconciliation statement has been delivered, the landlord must issue an amended statement reflecting the reduced tax liability. If the lease requires it, excess collections must be credited back to tenants.

The timing is critical. Texas county appraisal districts finalize values in July to August. For a December 31 fiscal year-end, a protest outcome may not be known until after the June 30 statement delivery deadline. Leases should address how to handle post-delivery tax adjustments.

Industrial Triple-Net Leases in DFW

The Dallas-Fort Worth industrial market is dominated by triple-net (NNN) leases. In a pure NNN structure, tenants pay all operating expenses directly — property taxes, insurance, and maintenance — in addition to base rent. CAM in this context is minimal or nonexistent; the reconciliation is limited to shared area costs.

The key compliance issue in Texas industrial NNN leases: property tax bills. Landlords must deliver property tax bills to tenants within a timeframe that allows payment before delinquency (January 31 of the following year for most Texas counties). If the lease is silent on notice timing, landlords who deliver tax bills in December are giving tenants 30 days to pay a bill that may not have been budgeted.

Low Vacancy and Gross-Up Provisions

Industrial vacancy in DFW and Houston has remained below 8 percent for most of the last five years. At high occupancy, gross-up provisions — which adjust variable expenses to a hypothetical full-occupancy level — are rarely triggered.

The risk is in retail and office: DFW office vacancy exceeded 25 percent in 2025. At that occupancy level, gross-up provisions apply broadly, and the calculations must be correct. A gross-up applied to fixed expenses (insurance, property tax) rather than only variable expenses inflates the pool and overcharges occupied tenants.

Recommended Compliance Steps for Texas Landlords

1. Ensure §93.012 Disclosure Is in Every Lease

Every lease in a Texas commercial portfolio should contain an explicit CAM disclosure that:

• Lists the categories of expense that are recoverable
• States the management fee percentage and its calculation base
• Identifies any administrative markups and their cap
• Describes how the pro-rata share denominator is defined

A lease exhibit titled "CAM Definitions and Calculation Methodology" satisfies this requirement cleanly and makes it easy to verify compliance without parsing the body of the lease.

2. Include an Explicit Audit Rights Clause

Draft a clause that specifies:

• Tenant must provide 30 to 60 days written notice before auditing
• Audit must be conducted by a licensed CPA
• Audit period is limited to the 12 most recent calendar months (or 24 months if the lease allows)
• Tenant bears the cost of the audit unless a material error exceeding 3 to 5 percent is found

This protects both parties. Tenants have a defined channel for disputes. Landlords have a defined scope for any inspection.

3. Document Management Fee Calculation Method in a Lease Exhibit

The management fee provision should not be a single sentence. It should specify:

• The fee percentage
• The base on which it is calculated (recoverable expense pool, not gross revenues)
• Whether on-site management salaries are included or billed separately
• The cap, if any, on total management fee recovery

A lease exhibit is easier to update at renewal than body language — and it is easier to audit.

4. Maintain a Current BOMA Measurement Certificate

The denominator used in pro-rata share calculations must be defensible. A BOMA-standard measurement certificate, updated after any significant tenant improvement that changes RSF, provides that defense. Texas courts have accepted BOMA measurements as authoritative in CAM disputes.

5. Keep Property Tax Appeal Documentation Separate from the CAM Pool

When a landlord files a property tax protest, the associated legal fees are typically not recoverable as CAM — they are ownership costs, not operating expenses. Keep property tax appeal costs segregated from the operating expense general ledger so they do not inadvertently flow into the recoverable pool.

If the appeal reduces assessed value, document the final tax bill and the original bill separately so tenants can be credited accurately.

Texas vs. California: Key Differences at a Glance

How CapVeri Supports Texas CAM Compliance

CapVeri audits CAM reconciliations against the lease — not against a generic template. For Texas portfolios, that means:

• Verifying management fee is calculated against the correct base defined in the lease
• Confirming no undisclosed markups are flowing through the expense pool
• Checking that the denominator matches the lease definition (leasable RSF vs. total building RSF)
• Flagging property tax entries that may include appeal costs
• Producing a reconciliation package that satisfies §93.012 disclosure by showing the full calculation methodology

Related resources: SB 1103 Compliance — State-by-State CAM Disclosure — CAM Demand Letter — CAM Pre-Send Checklist

Sources

1. Texas Property Code §93.012 — Texas Statutes, Property Code Title 8, Chapter 93
2. BOMA International — Standard Methods of Measurement
3. Texas A&M Real Estate Research Center — Texas Commercial Real Estate Market Reports
4. Harris County Appraisal District — Property Tax Protest Procedures