Lease Audits for Tenants: How to Spot Landlord Overcharges in 5 Steps

Commercial and residential tenants often face hidden fees, incorrect billings, and inflated operating expenses in their lease agreements. Without proper scrutiny, tenants may overpay thousands—or even millions—in Common Area Maintenance (CAM) charges, operating expenses, and submetering errors.

A lease audit is a powerful tool to identify and dispute overcharges. This guide provides a step-by-step process to audit your lease, spot discrepancies, and recover overpayments—plus a “Red Flags” cheat sheet for quick reference.

Step 1: Review Your Lease Agreement

Before diving into financial statements, understand your lease terms:

Key Clauses to Examine:

✅ CAM & Operating Expense Definitions – What costs are included/excluded?
✅ Expense Caps & Exclusions – Are there limits on annual increases?
✅ Audit Rights Clause – Does your lease allow you to contest charges?
✅ Submetering & Utility Billing – Are you billed based on actual usage or estimates?

🚩 Red Flag: Vague language like “landlord’s discretion” or “industry-standard charges” may indicate unsubstantiated fees.

Step 2: Analyze CAM Reconciliations

Common Area Maintenance (CAM) charges cover shared space upkeep (e.g., landscaping, security). Landlords often inflate these costs.

How to Audit CAM Charges:

1. Compare Budget vs. Actuals – Did the landlord exceed projected expenses without justification?
2. Check for Non-CAM Items – Capital improvements, landlord staff salaries, or marketing costs should not be included.
3. Verify Square Footage Calculations – Incorrect measurements lead to overbilling.

🚩 Red Flag: Sudden spikes in CAM charges without explanation.

Step 3: Scrutinize Operating Expense Statements

Landlords pass on property taxes, insurance, and maintenance costs—but may include ineligible expenses.

Common Overcharges to Detect:

🔹 Capital Repairs vs. Routine Maintenance – Tenants typically pay only for maintenance.
🔹 Management Fees Over 5% – Excessive admin fees are negotiable.
🔹 Double-Dipping – Charging for the same expense in multiple categories.

🚩 Red Flag: Expenses labeled “miscellaneous” or “administrative overhead” with no breakdown.

Step 4: Verify Submetering & Utility Billing

If utilities are submetered, errors are common:

How to Check for Errors:

✔ Compare Bills to Actual Usage – Request meter readings.
✔ Check Rate Calculations – Are you being charged fair market rates?
✔ Look for Shared Cost Leakage – Ensure you’re not paying for other tenants’ usage.

🚩 Red Flag: Estimated bills instead of real-time data.

Step 5: Dispute Overcharges Professionally

If you find discrepancies:

Action Plan:

1. Document Everything – Gather lease clauses, invoices, and reconciliation statements.
2. Request Backup Documentation – Landlords must provide receipts.
3. Send a Formal Dispute Letter – Cite specific overcharges and demand correction.
4. Negotiate or Escalate – If unresolved, consider mediation or legal action.

Pro Tip: Hire a lease audit firm for complex cases—they work on contingency (paid only if they recover money).

“Red Flags” Cheat Sheet

Tenants should audit leases annually to prevent overcharges. By following these 5 steps, you can:
✔ Uncover hidden fees in CAM, operating expenses, and utilities.
✔ Challenge incorrect billings with evidence.
✔ Recover overpayments and enforce lease compliance.

Final Advice:

• Keep detailed records—landlords may back down when presented with proof.
• Leverage technology – Lease audit software can automate expense tracking.
• Know your rights – Many tenants unknowingly waive audit rights in leases.

Don’t let billing errors drain your finances—audit first, pay correctly.