In the world of commercial real estate, all tenants benefit from the upkeep of common areas, so it stands to reason that those tenants can be assessed fees to help with the associated expenses. After all, a clean, well-maintained environment reflects on their business, gives a boost to daily operations and in a retail setting, likely helps keep customers coming back.
But exactly what can be included in common area maintenance, or CAM, charges can generate confusion. Many facets of property maintenance have an associated cost—from administrative and management fees, to cleaning walkways or tables, to landscaping and parking lot painting. Here a look at CAM charges, what they include or exclude and what you should keep in mind as a landlord.
CAM charges can vary widely and are determined before a tenant and landlord sign a lease. Overall, landlords prefer a broad definition of CAM charges, which enables them to pass along the burden of operating costs to tenants, while tenants want those charges clearly defined so that the landlord covers most of the operating expenses.
A tenant’s pro rata share of the CAM charges may be calculated based on the size of the space the tenant is using and its location or access to the common areas in question. CAM charges are generally broken into two categories.
Sometimes a tenant will request a cap on their responsibility for CAM costs. And sometimes the landlord will limit those charges to controllable CAM expenses, so it’s important to understand what those include and exclude.
Controllable CAM expenses may include upkeep of common areas such as hallways, lobbies, stairwells and bathrooms as well as outside areas such as parking lots and landscaping. They may also include building improvements and roofing, capital expenditures, third-party management fees and administrative costs.
Uncontrollable CAM charges include items like:
Although every lease agreement is different, many tenants prefer to include a long list of items that are not to be included in CAM charges. Those might include a laundry list of exclusions, such as:
It’s important for landlords to carefully review any list of exclusions to ensure no charges are excluded that are fairly and customarily listed among CAM charges.
CAM charges: your key to recouping costs
CAM charges are an effective tool for securing compensation for many of the costs you incur as a landlord. Operating, maintaining and repairing common areas can be costly, so negotiating CAM charges is a vital step in securing an agreement both you and your tenants can live with.