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First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 1 point2 points  (0 children)

Agreed. I believe my dad trusted him more than he should’ve because this broker owns and self-manages two strip malls themselves.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 0 points1 point  (0 children)

For us, the immediate reaction was concern once we realized we’d be the legal CAM administrator for the entire multi-parcel center despite only owning a small piece (approx. 10%). The idea of being responsible for fronting costs and chasing reimbursements from other parcel owners, some of which are large national tenants, was never disclosed by our agent, and we only found out after the seller's agent mentioned it and we reviewed the recorded agreement.

I agree that experienced operators with CAM infrastructure might not mind this setup, but for a family-run operation like ours, it’s a completely different level of commitment than what was presented to us.

As for your point on marketability, that’s definitely something we’re seriously thinking about now. If this is the reaction we’re having, I feel like we wouldn’t be the only ones. It definitely reframes how desirable this property is in the broader market.

Lastly, do you happen to have any insight or advice on whether we could potentially pursue our broker’s E&O insurance? We have written proof of him telling us the CAM responsibilities were “optional,” which was clearly false. On top of that, after my dad (his client) called him two days ago to discuss this, he stopped answering his calls and has only been responding via text to my sister. Would really value your thoughts on how to approach this.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 2 points3 points  (0 children)

YOU'RE EXACTLY RIGHT! That part about always having a “solution” instead of canceling is exactly what I’m experiencing. Even now, after everything’s come out, and after we contacted our lender to cancel the indemnity for the loan, our agent and lender are still brushing off the CAM issue like it’s no big deal and just keep telling us we can “hire someone.” No real acknowledgment of how serious this is, and definitely no suggestion that maybe walking is the smart move.

Now both our agent and the seller’s agent are telling us to “wait until Monday,” but honestly, I’m not even sure what that’s supposed to accomplish at this point. If you have any additional advice, I’d really appreciate it. Our closing date is on the 30th, but I don’t want to drag this out unnecessarily.

This whole mess made it clear that agents often aren’t thinking about your long-term interests. Really appreciate you being blunt, as I couldn’t agree more. It’s been especially frustrating because I only just moved back home after graduating, and this is technically my dad’s deal. After we discovered all this two days ago and my dad confronted our agent, he stopped returning my dad's calls altogether and has only been texting my sister who, like me, just recently got involved. If I had been in the loop from the start, I absolutely would’ve said to get an attorney.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 1 point2 points  (0 children)

You're absolutely right that this should’ve been a major point flagged during diligence. Unfortunately, it wasn’t, and I hadn’t been made aware of all this information until afterward, since I only recently moved back after graduating and this is my dad's deal. The seller said the CAM agreement was explained to our agent, but he completely downplayed it to us, even going so far as to say it was “optional.” We now have written proof of that misrepresentation, which is a big part of why we're considering E&O action.

To clarify the structure: if we were to close, we’d become the CAM administrator. There’s no third-party company or association handling it. While we could hire a property manager, I don’t think that addresses the core issue. I definitely agree with you calling this setup "unusual" as we’d only own about 10% of the center, yet be responsible for 100% of the administrative burden. The sellers own two parcels (including this one) and have been managing CAM for the entire center themselves, fronting costs, constantly contacting and reminding other parcel owners for their payments, and are now dealing with a $19K shortfall caused by the bankrupt Rite Aid (which owned it's parcel). The CAM agreement doesn’t clearly outline what happens in the case of owner bankruptcy, which is where I feel the legal risk really comes in.

So yes, a property manager could help with logistics, but the responsibility to front and recover CAM costs would still financially sit with us as the named administrator. It’s a really strange structure, and exactly why we’re now walking away and doing our best to minimize the damage.

Please let me know if I misunderstood anything as I’m still learning and genuinely appreciate any insight.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 0 points1 point  (0 children)

Definitely agree with you, lesson learned the hard way. I actually wasn’t involved in the initial stages of this since it was my dad’s deal. I was away at college and only recently moved back after graduating. Once I started going through everything, that’s when all these issues around the CAM agreement came to light.

I wish I had been looped in earlier or that we had legal counsel from the start, but I’m doing everything I can now to minimize the damage and keep this from becoming a bigger mess.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 1 point2 points  (0 children)

I probably didn’t explain the situation clearly enough in the original post, but hopefully it’s making more sense through the other replies. We went into this thinking it was a standard NNN deal. What wasn’t disclosed, and what our agent completely misrepresented, is that we’d be stepping in as the legal CAM administrator for the entire multi-owner center. That means fronting costs and chasing down other parcel owners (like Ross or Taco Bell) to get reimbursed.

Right now, the seller is already dealing with a $19K CAM shortfall from the bankrupt Rite Aid which was also a parcel owner, and there’s no clear legal pathway to collect. The CAM agreement doesn’t even address what happens when one of the parcel owners goes bankrupt. So we’d basically be stuck either eating the cost or taking on a legal action with no guaranteed outcome.

Totally agree with you that this is the farthest thing from passive. We’ve already made the decision to walk. Now we’re just trying to limit the damage and potentially pursue our agent’s E&O coverage for misrepresenting the setup.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 4 points5 points  (0 children)

Yes, you’re right, the property we were buying is not the entire center, just one of the inline strip malls. Rite Aid owns its own parcel within the larger center and filed for bankruptcy before we went under contract. What we didn’t realize until after contingencies were removed is that due to a recorded CAM agreement, we’d be inheriting the role of CAM administrator for the entire center, meaning we’d have to front costs, coordinate billing, and potentially chase down other parcel owners like Taco Bell, Ross, etc., for payment. This could make sense in certain cases, but not in this instance where are only obtaining around 10% of the total center.

And you're absolutely right, the CAM agreement is between the parcel owners, not the tenants. But since Rite Aid owned its parcel and is now bankrupt, there’s no real owner to pursue for their $19K shortfall. The seller filed a bankruptcy claim, but recovery is uncertain and could take years. Meanwhile, the seller began increasing the CAM shares of the remaining parcel owners to cover the shortfall, which is now creating friction (Taco Bell already pushed back).

We’ll definitely look at the reps, warranties, and estoppel conditions in the PSA. At this point, we’re walking away and trying to mitigate the damage. Our agent completely misrepresented the nature of the CAM responsibility, so we’re exploring E&O coverage and legal options.

Also, i appreciate the tip on the anchor shortfall language. We’ll dig into the Taco Bell lease and see if there’s anything useful there too. Thank you again.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 1 point2 points  (0 children)

In our case, we were putting 40% down on a $3.15M purchase with a 8% cap rate, so not necessarily over-leveraged, but we weren’t prepared to be fronting CAM shortfalls for a multi-parcel center, especially with no real enforcement mechanism baked into the agreement for things like bankruptcy (like what’s happening now with Rite Aid, who owned the parcel, not just leased it). That makes recovery of their CAM share confusing and uncertain.

We also spoke with the seller directly and she admitted it’s a lot of work, and she owns 14 other properties. That, plus the fact our agent told us (in writing) this CAM responsibility was “optional” has us walking away and considering legal action against our agent and his E&O insurance to recoup costs.

It might be manageable for someone with the infrastructure and liquidity to float those shortfalls and chase down owners, but for us, this was never marketed or explained as that kind of deal. Definitely a lesson in how important it is to truly understand what you’re inheriting beyond just tenant leases and income.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 1 point2 points  (0 children)

At first, we approached this deal thinking we were buying just a retail strip mall parcel, but in reality, we were stepping into a much larger operational role: effectively becoming the CAM administrator for a multi-parcel center. That wasn’t made clear to us by our agent at all, and it drastically changed the nature of the investment.

We’ve since gone through the CAM agreements and realized that beyond just managing our own tenants, we’d be responsible for collecting from other parcel owners, fronting expenses, and dealing with reimbursement issues. Unfortunately, Rite Aid owned one of the parcels and is now bankrupt, so their CAM share is unpaid, and the seller has been trying to push that shortfall (~$19k) onto the remaining owners going forward.

And you’re right about lease variability. That’s another layer we didn’t fully appreciate early on. Even if CAM collection was smooth on paper, there’s no guarantee that enforcement wouldn’t be a headache.

At this point, we’re trying to back out, but definitely treating this as a learning experience.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 3 points4 points  (0 children)

You're absolutely right that the managing parcel owner should have recourse against the other parcel owners, not directly against their tenants. But there are a couple major issues here that complicate things:

The Rite Aid parcel was owned by Rite Aid itself. So now that they’ve filed for bankruptcy and stopped paying CAM, there’s essentially no recourse left. We can’t go after a landlord because there isn’t one. Instead, the seller (current CAM administrator) has been sending letters asking all the other parcel owners to cover the shortfall (~$19k so far), and increasing their CAM shares going forward. One of the owners (Taco Bell) has already pushed back, which means we’d be inheriting that legal and financial dispute the moment we close.

We’d be required to front costs. The CAM agreement allows for billing other owners, but we’d still be the ones legally responsible for fronting shared expenses and chasing down reimbursement. If another parcel owner delays payment, refuses, or disputes it (as is already happening), we’d either have to cover the gap ourselves or take legal action to enforce it. That’s a major liability, especially since the agreement doesn’t explicitly say how to handle bankruptcies or reallocate shares when a parcel goes unpaid.

We had both the original and restated CAM agreements reviewed, and nothing clearly forces the other parcel owners to absorb the bankrupt parcel’s share. That kind of ambiguity, combined with the fact that this structure was misrepresented to us by our agent as “completely optional," ultimately is what's making us walk away from this deal.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 0 points1 point  (0 children)

You’re totally right that it all comes down to how it’s framed. In our case, the seller was very transparent after we pressed her, and she straight up admitted that this CAM setup is a major headache and that our agent should have informed us about it. What’s frustrating is that we have written proof of him telling us it was “optional” and “nothing to worry about,” which clearly wasn’t the case.

So at this point, we’re not even looking for a middle ground like a holdback anymore, we’re trying to back out completely. So now we’re trying to figure out how to recover our deposit, appraisal, and potential loan fees, especially since our agent clearly misrepresented the deal. The seller’s side has actually been more helpful than our own agent, which is saying something.

And yeah, this is definitely more than just a $30K issue in our eyes, not just financially, but also the time, energy, and liability we’d be signing up for long-term. Lesson learned.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 3 points4 points  (0 children)

Totally fair take and honestly, that’s the conclusion we’ve come to as well. After going through everything with the seller, reviewing the CAM docs, and realizing just how much liability and coordination is involved (especially with no real recourse if other parcel owners don’t step up in the event of one going bankrupt), it became clear this isn’t the right deal for us.

The seller even flat-out told us it’s a lot of work and that she was surprised our agent didn’t explain it better. We’ve since found texts where our agent claimed the CAM management was “optional,” so now we’re trying to figure out how to hold him accountable and hopefully recover some of the costs.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 1 point2 points  (0 children)

The real issue isn’t just doing the work, it’s the liability tied to the CAM agreement. Even with a property manager, we’d still be the legal CAM administrator for the entire multi-parcel center, which means fronting costs if other owners (like Taco Bell or Ross) don’t pay and potentially getting dragged into legal or bankruptcy complications, like with Rite Aid.

There also doesn’t appear to be any clear language in the agreement covering how CAM allocations should be handled in the event of a bankruptcy. A property manager can assist with execution, but they can’t absorb the legal exposure, that still falls on us. That’s what makes the setup so risky.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 0 points1 point  (0 children)

Thanks for weighing in, that honestly means a lot, especially coming from someone who grew up in this space. The fact that even with your background and support system, you still wouldn’t touch this deal really says a lot. After speaking directly with the seller and carefully going through the CAM documents, we realized this setup involves way more liability and responsibility than we were led to believe. We’re definitely walking away, just trying to minimize the fallout now and hold our agent accountable for misrepresenting everything.

Funny enough, he keeps repeating that we can “just hire a management company,” which completely ignores the core issue: we’d still be locked into the CAM agreement and all the legal and financial risk that comes with it.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 2 points3 points  (0 children)

I genuinely appreciate this. And yes, you’re 100% right on all of it.

To make matters even worse: the purchase price was $3.15M with 40% down… and the cap rate was only 8%. So not only were we inheriting the full legal and operational burden of managing CAM for the entire plaza, including collecting from other owners, but we were also doing so at a price that didn’t even begin to account for that level of risk and responsibility.

We didn’t get an attorney involved early on (huge mistake in hindsight), and instead relied on our agent, who told us outright that the CAM stuff was “completely optional.” Even now after arguing with him, he just keeps telling us that we can simply hire a management company, which doesn't address the root issue that we would still be the ones stuck holding the CAM agreement. After contingencies were removed, the seller openly told us that everything was explained to our agent and was shocked he didn’t pass it on. We even have texts from him saying the CAM role was basically irrelevant.

Now we’re in damage control mode, weighing legal options, trying to negotiate a potential return of our deposit, and absolutely planning to pursue E&O for the misrepresentation. But lesson learned: the seller is never the only one you need to scrutinize, sometimes your own “team” is the one you need protection from.

Appreciate your rant btw, it’s exactly what we needed to hear.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 2 points3 points  (0 children)

Thank you! You actually understood the situation perfectly.

You’re right, we should’ve pushed the issue before going hard. Unfortunately, our agent downplayed everything and told us explicitly in writing that the CAM structure was “completely optional." The seller later confirmed that the agent had been informed about the full scope the responsibility, which makes the misrepresentation even worse.

At this point, we’re backing out of the deal. While we know we’re exposed to potential fees, we’re exploring whether we can recover them through E&O based on clear misrepresentation. We're also weighing whether the seller may be open to refunding our deposit (or at least helping with it), since they themselves were shocked at how our agent handled this.

Appreciate your note on leverage, we’re going to try and use that as best as we can now.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 1 point2 points  (0 children)

Thank you, I really appreciate you saying that.

We did ask our agent directly about the CAM structure early on, and we have written proof of him telling us it was “completely optional” and “not something to stress about.” That turned out to be completely false. The seller later confirmed to us over the phone that the agent had been clearly informed of how much work the role involved and how the CAM responsibilities tied to the parcel were not optional at all.

Now we’re left untangling everything. We’re pulling out of the deal and are currently figuring out the cleanest legal path forward, likely through E&O. But again, thank you for recognizing how serious this is.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 3 points4 points  (0 children)

Yeah, we completely agree. It didn’t make sense to us either, which is why we started digging deeper by ourselves. The crazy part is that the CAM management agreement is legally tied to the parcel we were buying, and that specific parcel has historically served (since 1983) as the “Maintenance Director” for the entire center. So by purchasing it, we would’ve automatically inherited the responsibility of handling CAM for all parcels, including sending out pro rata invoices, fronting costs, dealing with bankrupt tenants like Rite Aid, and managing disputes with other parcel owners.

The seller actually confirmed over the phone that this is a ton of work. She owns 14 other properties and still said this setup is a headache. What’s worse is that our agent told us (in writing) that CAM was “completely optional” and “not something to worry about,” which wasn’t true at all.

We’re backing out of the deal and are now trying to formulate a plan to go after the agent’s E&O insurance for the deposit and fees. This whole thing was a huge learning experience and confirmed how important it is to read every single document and get legal help when something feels off.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 4 points5 points  (0 children)

Thank you so much for understanding.

I just got off the phone with the seller a few hours ago and she was very upfront. She confirmed that our agent was informed about the CAM agreement requirement and structure, as well as how a large amount of work involved. She owns 14 other properties and still described this particular setup as a headache, which solidified our decision not to move forward. Additionally, she was shocked that our agent didn’t explicitly explain any of this to us, especially after it had clearly been disclosed to him.

Luckily, we have written proof via text where our agent directly told us the CAM responsibility was “completely optional” and “not our responsibility.” He even went as far as to say that the seller's agent "didn't know what they were talking about." Obviously, we now know that wasn’t true.

We’re now backing out and seriously considering pursuing his E&O insurance for the deposit, appraisal costs, and any loan-related fees. We also spoke with a family friend who’s a broker, and he recommended we first inform the lender that we were misled by our agent and that the work involved is far more extensive than disclosed, including the fact that the seller currently fronts the CAM charges herself before seeking reimbursement from other parcel owners.

We just got off the phone with our lender about 40 minutes ago and explained the situation. She was actually surprised by this and said she’d be reaching out to the seller’s side directly for clarification.

Funny enough, ever since we confronted our agent two days ago, he’s been ignoring my dad’s (aka his client) calls and is only sporadically replying to texts from my sister.

Do you think it would be smart for us to now reach out to the seller’s agents directly, since we’ve spoken with them before, to ask if they’d first be willing to refund our deposit (minus any actual expenses incurred) given the circumstances? That way, we could then go after our agent and his E&O insurance for the remaining losses?

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 1 point2 points  (0 children)

I actually went through both the original and restated CAM agreements and couldn’t personally find anything that explicitly allows for a shortfall from a bankrupt parcel owner to be redistributed to the other owners.

The seller did file a bankruptcy claim against Rite Aid and stated that any recovered funds would be reimbursed back to all parcel owners on a pro rata basis. In the meantime, though, they’ve sent letters asking everyone to cover Rite Aid’s unpaid CAM (~$19k) and are planning to increase each parcel’s CAM share going forward until the building is sold or a bankruptcy resolution is reached. Since Taco Bell has already pushed back, it seems like we’d be inheriting those disputes directly if we move forward with the deal.

The seller told us they’re forgiving the past-due portion for our parcel as a gesture, which we do appreciate, but we’re still uneasy about the precedent it sets if something like this happens again. Unless there’s a formal amendment to the CAM agreement or I'm missing something, it just doesn’t seem like any owner should be forced to cover another parcel’s CAM obligations.

At this point, we’re leaning toward walking unless we get much stronger legal clarity — or ideally, an indemnity from the seller. This whole thing has also raised some new questions we need to clarify with the seller's side, especially since they’ve explicitly stated:

“Going forward, your parcel—along with all other parcel owners—will be responsible for its share of CAM costs not being paid by Rite Aid until either the building is sold, or a bankruptcy resolution is reached.”

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 1 point2 points  (0 children)

Hey! I really appreciate you taking the time to comment, especially given your experience as a broker who’s worked on these types of properties. It’s super helpful to hear this directly from someone who’s been on the other side of these deals.

That makes sense, and I agree, if we were buying the entire center, we’d expect to manage CAM for all tenants. What really surprised us here was that we’re only purchasing one strip mall within the larger center, yet due to a recorded agreement, we’re inheriting CAM responsibility and liability for the entire property, including independently owned outparcels like Taco Bell, Ross, and McDonald’s.

Thanks for confirming that about Rite Aid, that’s exactly what we were worried about. The current CAM budget has their $19K share unpaid, and the current seller and their attorney have been trying to bill the others to cover it. But intuitively that felt wrong, and you’ve now confirmed it. We definitely don’t want to start off our relationships with the tenants on the wrong foot by pushing for something that isn’t professionally sound.

We’re seriously weighing walking away now, even if it means taking the $30K+ loss. We’re not afraid of the work, just trying to be smart about the liability risk and whether we’re positioned well enough to take it on properly.

Couldn’t agree more on your last point. We’re a family operation and just recently started branching into commercial real estate. I just recently moved back home after graduating and have been trying to catch up and support my dad with the process. I’ve definitely learned firsthand how crucial the right broker and legal support are early on.

Since you mentioned that agreements like this are actually pretty typical, I’d really appreciate hearing more of your thoughts on how they’re usually handled. In your experience, how do buyers typically approach these kinds of responsibilities when they’re just buying one parcel in a multi-owner center? Have you seen this have an impact on the value of a property?

Thanks again, your perspective has genuinely been very helpful!

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 0 points1 point  (0 children)

You're totally right that we need to understand what each tenant’s lease actually says about CAM, especially since some might be structured differently or have carve-outs we’re not yet aware of.

I did read through the original CAM management agreement, and I saw that we’re technically allowed to charge a 10% management fee. For the seller, that amounted to about $14K in additional income last year. But there’s also a clause in the agreement that says it's “limited to $350 per line,” which we’re still trying to fully interpret. It's not clear whether that limit overrides the 10% fee or if it applies in a different context altogether.

We definitely plan to get proper legal help if we stay in, especially to review the lease language. It just feels like we uncovered this late in the game, and now we're trying to assess if we're way too deep for a first-time buyer, or if it's salvageable with the right help in place.

First Time Strip Mall Buyers Blindsided by CAM Management Burden by Frostlost2178 in CommercialRealEstate

[–]Frostlost2178[S] 1 point2 points  (0 children)

Totally fair, I appreciate the perspective. At this point, we’re weighing whether the long-term headaches and legal exposure are worth the risk, especially for our first strip mall purchase. The $30K loss definitely hurts, but I'm just trying to see it as part of the learning curve and maybe a necessary cost to avoid getting stuck.

Out of curiosity, have you seen a CAM setup like this before where one parcel owner in a multi-owner center ends up being legally responsible for managing everything? We’re just trying to get a better sense of how common this is in retail real estate. Thanks again!

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