Fraud and Abuse Issues

Any discussion of the delivery of health care must involve an overview of federal and state reimbursement laws. Termed “fraud and abuse,” these laws are designed to protect the integrity of federal and state reimbursement programs from fraud, waste, and abuse.

Studies by a variety of federal agencies and private organizations estimated that the yearly cost of fraud, waste, and abuse in the health care industry is in the tens of billions. Overpaying for health care impacts the cost of health care for everyone. Politicians have passed laws and administrators of these programs have enacted regulations to provide safeguards and stiff penalties for those who take advantage of the system.

Both the federal government and the State of Texas have similar laws regulating reimbursement. Taken together, they create an interrelated regulatory framework that affects almost every facet of the provision of health care in Texas.

False Claims Act

The False Claims Act (FCA) protects the federal government from being overcharged or sold shoddy goods or services. This is a broad, catchall act that makes it illegal to submit claims for payment to Medicare or Medicaid that you knew or should have known were false or fraudulent. Filing false claims may result in fines of up to three times the program’s loss plus $10,000 per claim filed. Under the civil FCA, each instance of an item or a service billed to Medicare or Medicaid counts as a claim, so fines can add up very quickly.

A particularly onerous facet of the FCA is that it doesn’t require someone who violates it to have intended to defraud it or know about the fraud. It defines “knowing” to include not only actual knowledge but also instances in which the person acted in deliberate ignorance or reckless disregard for the truth or falsity of the information. The FCA contains a whistleblower provision that allows a private individual to file a lawsuit on behalf of the United States and entitles that person to a percentage of any recoveries. Whistleblowers could be current or ex-business partners, staff, patients, or competitors.

There is also a criminal FCA. Criminal penalties for submitting false claims include imprisonment and criminal fines. Health care providers can and do go to prison for submitting false health care claims. The Office of Inspector General publishes a regular report regarding all enforcement actions taken at

Anti-Kickback Statute

The Anti-Kickback Statute (AKS) is a criminal law that prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or to generate any business involving any item or service payable by the federal health care programs. This includes anything of value and can take many forms besides cash; these could include free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies. Even if it is appropriate in some industries to provide this type of remuneration, in the federal health care programs, paying for referrals is a crime. The statute covers the payers as well as the recipients of kickbacks.

Criminal penalties and administrative sanctions for violating the AKS include fines, jail terms, and exclusion from participation in the federal health care programs. Health care providers who pay or accept kickbacks may also face penalties of up to $50,000 per kickback plus three times the amount of the remuneration.

Because the AKS is so broad, it outlines certain safe-harbor provisions that specifically exempt certain payments in business practices that might otherwise implicate the AKS. To be protected by one of these safe-harbor provisions, any an arrangement must square with all its requirements. These provisions address personal services and rental agreements, investments and ambulatory surgical centers, and payments to bona fide employees.

As a chiropractor, you are a target for kickback schemes because you may be a source of referrals to physicians or other health care providers and suppliers. Especially if you have an integrated practice, you may be tempted by others to refer patients to health care providers who are part of your practice who receive reimbursement from state or federal programs. Doing so is a violation of the AKS and will result in civil and criminal penalties unless it falls within a safe-harbor provision. The “safe harbor” regulations describe various payment and business practices that although they potentially implicate the federal anti-kickback statute are not treated as offenses under the statute.

The AKS applies to all sources of referrals, even patients. For example, where the Medicare and Medicaid programs require patients to pay copays for services, you are generally required to collect that money from your patients. You may waive a copayment if you make an individual determination that this or that patient cannot afford to pay or if your reasonable collection efforts fail, but routinely waiving these copays could bring the AKS down on you.

Physician Self-Referral Law (Stark Law)

The Physician Self-Referral Law, commonly referred to as the Stark Law, prohibits physicians from referring patients to receive “designated health services” payable by Medicare or Medicaid from entities with whom the physician or an immediate family member has a financial relationship unless an exception applies. Financial relationships include both ownership/investment interest and compensation arrangements. The same caveat applies here as with the AKS. Referring patients or entities in which you have a financial interest is a violation unless an exception applies. A practitioner in an integrated practice must be diligent to avoid any such referrals.

The Stark Law is a strict liability statute, which means proof of specific intent to violate the law isn’t required. The Stark Law prohibits the submission (by you or anyone else on your behalf) of claims in violation of the law’s restrictions on referrals. Penalties for violations include fines as well as exclusion from participation in the federal health law programs.

Texas Medicaid Fraud Prevention Act

The Texas Medicaid Fraud Prevention Act is analogous to the federal False Claims Act. It too contains whistleblower provisions to combat false claims at the state level. Further, it prohibits the submission of many different types of false claims. Similarly, the statute doesn’t require actual knowledge for a violation to occur, only that the person knew or should have known that the claim was false.

Unlike the False Claim Act, the Texas act covers only Medicaid fraud. It also provides a range of penalties different from those of the False Claim Act. Nevertheless, it remains a powerful tool that the Texas attorney general may use to protect the Medicaid dollars Texas is handling.

Texas Patient Solicitation Act

I’ve dealt with patient solicitation more fully in chapter 5, but please note that solicitation is not only a violation of Texas law but may also be a violation of federal reimbursement regulations.
In the integrated-practice context, a common area of liability is in the payment of compensation to one entity as remuneration for the referral of patients. Sometimes, this is as innocuous as a payment made to an MSO for a variety of services including “marketing.” The MSO then in turn refers certain patients to that health care provider. Even if such acts are unintentional, they’ll subject the practitioner and MSO to liability under patient solicitation provisions as well as the Stark Law.

Final Note on Fraud and Abuse

The federal and state reimbursement regulations create a spider web of liability waiting to ensnare the unsuspecting and uninformed practitioner. It’s essential that you understand these prohibitions and appreciate the consequences of violating them.

Whether you’re trying to increase your patient referrals or to create an integrated, multidisciplinary practice, you should hire an experienced health law attorney to advise you. Failure to do so could have unintended and dire consequences.

Benefits of Integrating Your Practice; Don’t Miss Out

Chiropractors often ask me about integrated practices. They’ve heard the term and have been told it’s the secret to a thriving practice, but they are concerned that they might violate federal reimbursement guidelines and they’ll end up in prison.

There’s a lot of confusion about what integrated practices are and what benefits they can provide. There is even confusion about what they’re called: integrated practice units, clinically integrated practices, multidisciplinary practices, and any number of other names.

Whatever the terminology, my purpose for this chapter is to provide a consistent, working definition of what an integrated practice is, and more important, what it means to the practice of chiropractic. As you will see, under this broad term, there are many variations. What might work for one chiropractor might not work for another. There is no “one size fits all” integrated practice that’s appropriate for all practitioners.

What Is an Integrated Practice?

An integrated practice is a patient-centered health support team that focuses on cost-effective, value-driven, outcome-based, high-quality care with the patient at the center. This is most often accomplished through a multidisciplinary team working at the same location. In some instances, this could mean working with a medical doctor who regularly sees patients or reviews charts. In other instances, it could mean a chiropractor, massage therapist, pain-management specialist, and/or a nurse practitioner in one spot providing a broad spectrum of care.

Benefits of Integration

Integrated practices are good fits for chiropractors. Not only does a multidisciplinary team fit well into a chiropractor’s holistic approach to health care, but also, the chiropractor is often the hub around which holistic treatment options revolve.

In a recent survey, 76 percent of doctors of chiropractic said they felt that a joint effort with other health care professionals allowed them to provide superior patient care. Fifty-one percent stated they had benefited from more patient referrals, and 38 percent had experienced practice growth. Only 13 percent reported that they didn’t experience positive changes.

Multidisciplinary practices are the future of healthcare in the United States because they can offer greater patient satisfaction, improved outcomes, and lower health care costs. With the Affordable Care Act, there is now less emphasis on fee-for-service and more emphasis on reimbursement for improved patient outcomes. Thus, health care providers in many disciplines are eager to find options that improve patient care and lower health care costs.

Therein lies perhaps the greatest benefit of a multidisciplinary approach: improved patient care through the synergy of specialists working together to treat the complex health needs of today’s patients. The additional benefits may very well be increased patient referrals and an ability to provide a safe alternative to traditional, medicine-based treatment. Regardless of the motivation, as the healthcare landscape continues to change, so too must chiropractors change to meet the needs of patients and maximize the metrics on which reimbursement is based.

Structuring an Integrated Practice

There are many ways to structure an integrated practice. Seemingly endless combinations of healthcare disciplines could in theory be integrated into a single multidisciplinary team. Given the confusion as to terms, structure, and purpose of integrated practices, I always try to diagram the legal structure for my clients so they can understand how all the moving parts work together. Below are two such diagrams. The first is a model involving a physician’s medical practice that hires chiropractors directly with an MSO in a supporting role.

Figure 1 – Integrated Medical Practice Model

The second diagram is a chiropractic-focused practice that uses a physician as a clinical director but also hires other chiropractors and physical therapists. It too uses an MSO in a supporting role.

Figure 2 – Integrated Chiropractic Practice Model

With the changes in Texas law in June 2017, there is now a third model called the Jointly Owned Practice model.

Figure 3 – Jointly Owned Practice

Notice the commonality between the two structures: the MSO does not itself employ chiropractors or physicians. One of my clients was under the erroneous assumption that the MSO would be the employer for all the healthcare providers. An MSO is for nonclinical activities such as outsourced administrative functions. All clinical functions should remain within the chiropractic or medical practice. If you want to provide services outside the scope of the practice of chiropractic (see chapter 3), one option may be to integrate with a medical practice.

As you think through the process of identifying disciplines to integrate in your practice, consider the needs of your patients as well as your experience level and understanding of how the various disciplines can work together to improve patient outcomes. Make an honest assessment of your experience, knowledge, and abilities; that’s an essential step in developing a plan to expand your practice.

With the requisite knowledge and experience, many options are open to you. In some practices, a physician-extender strategy, namely, hiring a nurse practitioner or physician assistant, may be a good first step. Some of the most successful multidisciplinary practices have a combination of a chiropractor and nurse practitioner on board. Of course, the nurse practitioner must operate within the scope of his or her licensure and be free to exercise his or her own judgment. Given that understanding, however, a nurse practitioner can provide another facet of healthcare your patients might not be currently receiving from you alone.

Some practices have found success in slowly adding additional disciplines as needs arise. You could perhaps start with a massage therapist and then a physical therapist, and that could lead to a nurse practitioner, which might then lead to an occupational therapist.

There is no cookie-cutter way for a chiropractic practice to become integrated. Listen to your patients’ needs, and be honest with yourself about your own level of experience and knowledge. You’ll then be in the best position to make reasonable decisions about whether integration (and if so, how much integration) is right for you.


Once you have made the decision to integrate, don’t attempt to do it by yourself. The wrong structure or business model could subject you to civil and criminal liability under state and federal reimbursement laws and regulations. As discussed in the following chapter, fraud and abuse violations bring with them significant penalties that could bankrupt the uninformed chiropractor and even land him or her in prison.

Your best bet is to contact an experienced health law attorney who can walk you through the process of integrating your practice and advise you on the proper structure, the types of business entities you should create, and how to handle compensation among the various health care providers. The structure will likely include a management services organization, but there will be many other contracts as well, and they all must be structured to comply with federal and state laws and regulations.

Management Services Organizations Key to Better Care, Higher Revenue

Management services organizations have become an important part of the health care landscape. Many practitioners are on the lookout for alternative payment and practice models that offer their clients higher quality care and control their costs, thus boosting net revenue.

There’s nothing magic about management services organizations, MSOs. Many industries outsource business and administrative functions to entities with the expertise, personnel, and infrastructure to provide such services more efficiently. But when combined with a chiropractic practice, especially one that is integrated with other health care providers, MSOs can become a powerful tool to grow your practice and improve patient outcomes.

What Is a Management Service Organization?

An MSO is a business that provides nonclinical services to providers. Some MSOs are established to provide a very narrowly focused set of services such as collections and billing, while others provide a wide gamut of administrative and financial services including:

  • administrative, operational, financials
  • personnel
  • education
  • coding, billing and collection
  • office space
  • equipment
  • information technology
  • compliance
  • credentialing
  • group purchasing
  • managed care
  • strategic planning

Some MSOs will specialize in one or two of these services, while others will provide the whole spectrum.

In its simplest form, an MSO is a company with expertise in a specialty or a group of specialties. Clinics can lower their costs by using MSOs because MSOs can perform certain services cheaper than the clinics can. For example, through economies of scale, an MSO that provides billing and collection services can do so for many clinics more efficiently than each clinic could individually.

Figure 1 – MSO for Chiropractic Practice

Here’s an illustration of this. Let’s assume there are ten chiropractic clinics in a market area or in a related group. Each clinic handles its own billing and collection services. That means they’ve collectively replicated the people and processes ten times. If, however, the chiropractors outsourced their individual billing and collection needs to an MSO, they could take the best personnel from each of their practices and through economies of scale process billing and collection for all ten practices more efficiently than could each practice by itself.

This economy of scale is not limited to billing and collections. It may be that a clinic doesn’t have or can’t obtain without great expense the financial expertise to appropriately report critical business metrics. Rather than creating it in-house or doing without it altogether, a clinic could outsource this financial reporting function to an MSO with the expertise such services require. Any clinical function that requires personnel, expertise, or infrastructure is a candidate for outsourcing.

Opened or Closed MSOs

MSOs can be structured in numerous ways. Many health care MSOs are Closed MSOs. For instance, a group of related practices could form an MSO to provide services to the members of that group only. The members of the group would take the best and brightest from each of their practices and migrate them to their private MSO. This group of skilled personnel will then provide services more efficiently to the practices in the group than could each of the practices separately. In many cases, the chiropractors in the group create and own the MSO, and they don’t take on other practices as clients; they provide only to themselves the specific types of services their practices require.

On the other hand, other MSOs are Open MSOs, meaning they take on as clients any clinic regardless of whether it’s part of any particular group. They simply provide services to any clinic that hires them. These MSOs tend to be more specialized. An MSO may provide billing and coding services but not personnel or financial reporting services.

Establishing Your Own MSO

Outsourcing to an established MSO is a great way for a chiropractor just starting out to lower initial start-up costs and offload some of the responsibility of training staff. More-experienced chiropractors may want to create their own MSOs to provide services to a closed group of practices or to provide services to a broader number of clients.

The lure of improved quality of care and reduced costs is a great motivator for practitioners looking to expand their revenue stream. Further, creating an MSO is often seen as the first step to an integrated, multidisciplinary practice as discussed in the following chapter.

If and when you start thinking about creating your own MSO, listen to these few words of warning. First, starting an MSO from scratch is not for the faint of heart. Some chiropractors have visions of establishing a full-service MSO from the very beginning, but that’s often a mistake. Because of the wide range of services an MSO can provide, you should start slow and expand into additional disciplines only when you’ve developed an expertise for the services you’re currently providing.

One of my clients was about to make this very error—he wanted to start a full-service MSO from scratch immediately. Without understanding what he was obligating himself to do, he started signing chiropractors up. Fortunately, we were able to tap the brakes, and once we explained to him the magnitude of obligations he was committing himself to offer, he quickly reformed his plans to something more realistic.

My advice is to create an MSO to provide services you need for your clinic. Don’t take on additional clients until you’re confident your MSO has acquired or developed the requisite personnel, expertise, and infrastructure to provide that service on a larger scale. Only after you’ve developed that expertise should you expand into other areas.

Second, make sure your MSO is established as an appropriate legal entity and that you have all needed agreements between your MSO and your clients. Because an MSO is providing nonclinical services, it doesn’t need to be established as a professional entity under Texas law. Many MSOs are LLCs or limited partnerships.

Care should also be taken to draft appropriate contracts, called Management Services Agreements (MSAs), which will be signed by the MSO and your client clinics. These MSAs will outline the relationship between the MSO and its clients and describe the services the MSO will provide.

This is a critical step in the process, and it is important that the contracts be drafted by an experienced health law attorney. As explained in chapter 10, an arrangement not properly structured could lead to liability issues or to fraud and abuse claims under federal and state law.

Finally, you may need additional contracts for some of the services you will be providing. If the MSO will provide the office space in which the clinic will operate, the MSO will need to sign a lease with the landlord and a sublease with the clinic. Similarly, if the MSO will provide equipment to the clinic, it will need to obtain that equipment from the appropriate vendor and enter into an equipment lease with the client clinic. Again, these agreements should be drafted by an experienced health law attorney to ensure that they comply with federal and state laws and regulations.


The creation of an MSO is often seen as the first step in the creation of an integrated, multidisciplinary practice. If this is your goal, please read the next two chapters carefully. There is a lot of confusion in the chiropractic industry about exactly what these terms mean and about the fines and penalties associated with violations of federal and state law.

This is not an area where you should ever cut corners. Find a qualified attorney who can advise you on the appropriate arrangement for your desired outcome.

How to Handle Patient Complaints

Your Patient Filed a Complaint Against You. Now What?

The unfortunate reality of being a professional is that you may one day be faced with a complaint filed against you by a disgruntled patient. Sometimes, a patient will complain that his or her chiropractor has fallen short of the expected standard of care. Other times, filing a complaint is a ruse some people use to avoid paying their bills. Whatever the reason, complaints filed against you must be taken seriously and responded to in a timely and appropriate manner.

Even if you feel a complaint has no merit, hire experienced counsel to represent you throughout the entire complaint process. Your attorney can make sure you meet all the applicable deadlines involved in the complaint process and put you in the best position possible for a favorable outcome.

How Complaints Are Filed

The Texas Board of Chiropractic Examiners (TBCE) is a regulatory agency whose purpose is to aid in the enforcing of laws regulating the practice of chiropractic. Part of that regulatory responsibility involves the handling of complaints against licensees. An efficient and transparent process for accepting and handling complaints benefits the profession by holding chiropractors to the appropriate standard of care expected in the profession. The TBCE has published a form patients can use to file a complaint. They even provide a helpful FAQ about the complaint process.

When the complaint is filed, the TBCE will acknowledge receipt of the written complaint and review the allegations. If it finds there’s some evidence to warrant further investigation, it will notify the practitioner of the allegations and request a written response. The Director of Compliance and Investigations will review the chiropractor’s response and recommend turning it over to the Executive Director or the Enforcement Committee. The Enforcement Committee consists of two doctors of chiropractic and one member of the public. They will then decide whether a violation has occurred, and if so, they’ll refer the matter to the full board.

The board will generally contact the complainant and chiropractor throughout the process. After the investigation, if the Enforcement Committee finds a violation of the Texas Chiropractic Act or the Texas Administrative Code, it can take several actions ranging from a written reprimand to the revocation of the chiropractor’s license.

Unless the complaint is dismissed without requiring a response from the chiropractor, the process usually takes three to six months.

All the disciplinary actions taken by the TBCE are published on their website. As you peruse the site, you’ll see a wide variety of board actions, including:

  • cease-and-desist letters
  • fines
  • probation
  • revocation of license
  • reprimands

All these actions are available to the public online in an Excel spreadsheet or PDF files. Let these serve as a lesson to you to take complaints seriously. If you don’t, your story could become a row in spreadsheet for all your colleagues and potential patients to see.

How to Handle Complaints

From the chiropractor’s perspective, the complaint and investigation process follows predefined steps. The TBCE provides a helpful guide. Within thirty days after a complaint is received, the board will contact the parties and others with knowledge of the complaint. They will review the case, request records if necessary, and notify the parties of the timeframe and investigative process.


Investigation and Complaint Process

At that point, the board will recommend to the Executive Director administrative closure of the complaint if it’s unsubstantiated or doesn’t constitute in its opinion a substantive violation. If there appears to be enough evidence to support the complaint, the matter will either be referred to the Enforcement Committee for further action or handled directly by the Executive Director.

If it’s handled by the Executive Director, most likely, the chiropractor will receive a warning letter, an education letter, or other administrative resolution. If, however, it’s referred to the Enforcement Committee, it could take further action including informal conferences, agreed final orders, cease-and-desist orders, or in some cases, hearings before the State Office of Administrative Hearings.

Within fourteen days of an Enforcement Committee action, it will issue agreed orders, an education letter, or a warning letter. At that point, the chiropractor will have twenty days to sign and return the agreed final order or request an informal conference with the enforcement committee. If neither of those two things occurs, the matter will be set for hearing and decision by the State Office of Administrative Hearings.

Cases resulting in disciplinary action are reported to the National Practitioner Data Bank. It is therefore critical that a chiropractor treats all complaints seriously and retains appropriate legal representation.

I’ve represented health care providers who found themselves the subject of board investigations. Most of the time, these complaints are baseless. In one such instance, we were able to respond to the investigation board with a succinct, logical progression of the facts that we supported with the patient’s medical records. After receiving our response, the board found the complaint without merit and simply closed the investigation.

Top Tips for Doctors Negotiating Commercial Property Leases

Whether you’re building your practice from scratch or managing an existing practice, at some point, you’ll negotiate a commercial lease. Commercial leases can take many forms depending on what property they involve—leases for space in a shopping center will differ from those for office space in a professional building.

Whatever your locale, you should become familiar with certain characteristics of leases. An adequate understanding of these principles will go a long way in helping you negotiate a lease you can live with and appreciate the consequence of the terms it contains. Not all of these topics will apply to your lease, but at least you’ll go into the process with a clear understanding of them.

Triple Net Lease

Many commercial leases are called triple net leases; it’s a form of a real estate lease in which the tenant or lessee is responsible for the ongoing expenses of the property, including real estate taxes, building insurance, and maintenance in addition to rent and utilities.

Triple net leases are most often used for freestanding commercial buildings, but they can also be used for other property types. They will often specify a “minimum guaranteed rent” in addition to all the other expenses associated with the property. Annual or quarterly payments for insurance and taxes are escrowed each month. This is in addition to the minimum guaranteed rent.

In many triple net leases, the tenant is also responsible for his or her percentage of common area maintenance, called CAM. This includes landscaping, maintenance, utilities, and other costs associated with the common areas all the tenants enjoy. So as you can see, your rent payment is just one part of your total monthly payment.

For some leases, the monthly rent is also tied to a percentage of sales. It is unlikely that chiropractors will be asked for a percentage of their revenue, but if you are looking to lease space in a shopping center, this type of provision may be in the standard lease provided to you. This will be one of the first provisions you will need to strike out.

What to Watch Out For

Given the variety of leasing terms, it’s impossible to make a comprehensive list of all the arrangements you should watch out for. However, in my practice, these are the biggest issues I see in the leases I review for clients.

Escrow Taxes and Insurance

In most leases, you’ll be asked to make payments toward taxes and insurance into escrow each month in addition to your base rent. You should make every effort to get a realistic assessment of what your taxes and insurance costs will be. Whenever you arrive at your estimate, add another 10 percent to that number to give you some budgetary leeway. If that means you lease a smaller space, so be it. If you get behind on your lease payments, you’ll expose yourself to potential default under the lease and give your landlord the chance to seek remedies under the lease.

CAM—Common Area Maintenance

In many commercial leases, the tenants are responsible for the costs of maintaining the common areas—typically lobbies, reception areas, public restrooms, atriums, parking lots, and the like. Typically, you’re responsible for the percentage of the common area relative to your percentage of leasable space in the entire facility. Make sure that you understand how your costs are calculated and that all tenants are sharing the bills for the maintenance of these common areas.

I’ve read leases that give landlords the authority to waive common area maintenance fees for some of the larger tenants; the square footage these “favored” tenants lease is removed from the calculation, which increases all the other tenants’ percentage of responsibility.

You should also be clear about what’s included in the calculation. Many landlords will charge a management fee to maintain the common areas, and that fee can be 10 to 20 percent of the annual costs of maintenance. While there’s certainly value in the landlord managing the maintenance efforts, this fee is often a hidden expense tenants don’t anticipate.

Finally, it’s common for leases to provide some type of cap on increases of CAM expenses. For example, some leases might cap the increase at 8 percent, meaning that the cost increases cannot exceed 8 percent from the previous year. Make sure your lease contains such a provision and that the cap is 10 percent or less.

Utility Billing

Many property owners hire companies to monitor and invoice utility services to their buildings. These companies issue monthly invoices based on the square footage each tenant occupies as well as a percentage of the utility bills for the common areas based on that square footage.

My advice to you is to monitor these expenses routinely because the accuracy of these types of companies can vary wildly. Verify that the electricity meters are being read correctly. If you have any questions, speak with the landlord or property manager as soon as possible. These types of inaccuracies get only worse. If a dispute arises with the landlord, the worst possible time to deal with it is at the end of your lease.

One of my clients found himself in just this situation. He’d noticed that the electricity charges for the common areas and his space were way beyond what he thought he should have been paying. He brought it to the attention of the property owner a few times, but the problem was not corrected. Unfortunately, he ignored the impasse. For two years, he refused to pay any electricity charges for the common areas. That obviously drew the animosity of the property owner, who would have been perfectly within his rights to evict my client.

And then, two years later, my client got an offer to sell his business and needed the landlord to agree to assign the remaining term of his lease to the new owner. Assignments are purely at the discretion of the landlord. Knowing he had my client over a barrel, he demanded $80,000 in CAM reconciliation charges. We were able to negotiate that amount down to $30,000, which was still probably too much. But my client was in a weak bargaining position. He needed to sell his business, and the landlord was standing in his way. We could have filed a lawsuit, but that would have taken up to a year to resolve, and my client didn’t have that kind of time.

Had he dealt with the issue better upfront, he could have avoided the frustration at the end and put himself in a better legal position to get concessions from the landlord.

Monitor the Lease Ledger

Commercial landlords keep a ledger for each tenant that records each debit and credit associated with the lease for that tenant. An example of such a ledger is provided in appendix I. You’ll see that all entries are included—from the initial security deposit and first month’s rent to monthly escrow receipts and annual tax and insurance payments.

The ledger is also a good way to monitor CAM expenses so you can make sure they don’t exceed the negotiated cap on increases. Again, if you have any questions about the ledger, ask them as soon as you can. These types of disputes rarely go away on their own.

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