A Corporate Tenant’s Guide to Common Area Maintenance (CAM)

February 22, 2021 Don Catalano Don Catalano

There are other costs aside your monthly rent that you will be required to pay when you rent an office space. One of these costs is the Common Area Maintenance (CAM). Here are a few things you should know.

 

What is Common Area Maintenance?

Common Area Maintenance (CAM) is one of the three main components of operating expenses. Together with property and insurance taxes, CAM is part of the Triple Net Lease.

 

Tenants pay Common Area Maintenance (CAM) fees to help in covering costs associated with overhead and operating expenses for common areas. A common is an area of the building that is used by all tenants and include lobbies, elevators, hallways, parking lots, public bathrooms and building security.

 

Common Area 1

 

The CAM expenses are used in cleaning these areas as well as other maintenance required to keep them in good working condition. Common area maintenance can be a bit confusing, so it is important to understand the term before signing the lease. For instance, the common area maintenance isn’t limited to the maintenance only, but also the cost of using the common area.

 

Calculation of Common Area Maintenance

At the beginning of the year, the landlord estimates what will be the budget for the common area maintenance. The CAM budget is then divided among the tenants who are in the building. The CAM estimate is divided according to the portion of the space that each tenant occupies. For instance, a tenant that occupies half of the building will pay half of the CAM expense. The total CAM expense is also divided into monthly operating expense which is paid throughout the year.

 

What is Included in CAM Expenses?

In commercial real estate, electricity expense is included in the common area maintenance. This is because electricity is usually passed across the building and the landlords expect tenants to use the same amount of electricity per square foot. The electricity expense is divided across all tenants based on their size in the building.

 

In addition to the electricity expense, the janitorial costs are often included. Common areas such as the restrooms and lobbies often require attention. Administrative fees, landscaping, and parking lots are some of the fees that are also included.

 

What Corporate Tenants Need To Do About Common Area Maintenance Charges?

As a corporate tenant, there is nothing you can do about Common Area Maintenance even though landlords are now providing alternative lease structures. CAM fees are usually based on real costs which the landlord shares among the tenants. Some landlords are flexible with the fess included in the CAM fee, especially if you are signing a long-term lease or occupying a large portion of the office building.

 

Common Area 2

 

To avoid paying the wrong fee, you can work with a tenant broker to help you fully understand how you can control what you are paying as a CAM fee.

 

It is also important that you read your lease document carefully to check out how the CAM fee is calculated and what your landlord is including in your CAM. When in doubt, you can request that the landlord justify the cost.

 

Reach out to us to learn how we can help your business with its commercial real estate needs.

 

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