Common Area Maintenance, frequently abbreviated to CAM, charges are ways that your landlord recoups the cost of running the shared areas (defined broadly!) of the building. Typically associated with triple net leases, these charges can be a significant part of your total occupancy cost.
What's a Common Area? What's Maintenance?
A common area is a shared part of the building. Classic examples of a common area are the hallways and lobby in an office building. They aren't a part of anyone's space, but pretty much everyone needs to use them. The common area maintenance charge covers the cost of lighting them, cleaning the carpet, and everything else involved in keeping them working.
Common areas go beyond physical common areas, though. Frequently, garbage service will get included in CAMs. Garbage isn't a physical space, but it is a part of the building that everyone shares in common.
Maintenance also means more than maintenance. It refers not to the cost of repairs and maintenance (although they're included), but to the total cost of having the space there for your use.
How Does the CAM Get Calculated?
Typically, the landlord will add up all of the common area maintenance expenses for the building to get a total bill. Then, he or she will parcel it out to each tenant based on that tenant's share of the space in the building. A tenant that takes up half of the building will pay half of the CAMs, and one that takes up one-tenth of the building will pay one-tenth of them. Each tenant pays their "pro-rata share."
At the beginning of the year, the landlord estimates CAMs based on a budget, and then splits it into annual payments. Usually, when the year ends, they prepare a reconciliation and either send you a bill if the actual common area maintenance costs are higher than the estimate, or send you a check if they spent less than they collected.
Is Common Area Maintenance the Same Thing as Operating Expenses?
This a simple question with a complicated answer. Technically, CAMs only refer to the costs related to the common areas as charged to tenants. Property taxes and insurance technically aren't CAMs. They are operating expenses that are passed through to you as the tenant. In addition, you might get billed for charges that are specific to your space -- like your space's sub-metered utilities or the cost of having someone come in and repair a broken sink. Those definitely aren't common area expenses, but they might be included in your monthly CAM bill.
In the real world, the terms CAM, pass throughs and operating expenses can be used interchangeably. As such, it is very important to carefully read your lease (or the fine print on a proposal from a landlord) to understand what you will have to pay, when and how.
Do CAMs Change?
As discussed above, CAMs can change annually. In addition, anything billed directly to you can change based on your use of that service.
What Can I Do About Common Area Maintenance Charges?
Common Area Maintenance is usually an unavoidable part of being a tenant, although as the 2010's come to a close, some landlords are providing alternative lease structures. However, understanding what you will pay and controlling what you can control can help minimize those costs. In addition, read your lease carefully to see if you have the right to request that the landlord justify their CAM charges. If they are making a calculation error, you might be able to recover savings through a CAM audit. The other way to control these costs is to look for more efficient buildings and always look not at the base rent, but at the total occupancy cost (rent plus CAM plus other pass throughs).
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