Common Area Maintenance (CAM) Charges are fees that tenants pay in addition to their base rent to cover the expenses related to the upkeep and general maintenance of shared spaces in a commercial property. These areas can include lobbies, hallways, restrooms, parking lots, elevators, and landscaped areas.
Definition and Calculation
Common Area Maintenance Charges (CAM) represent the allocated costs of maintaining and operating the shared areas of a property. The calculation often includes expenses such as:
- Landscaping: Maintenance of outdoor areas, including lawns and gardens.
- Cleaning Services: Janitorial services for shared restrooms, hallways, and other common areas.
- Repairs and Maintenance: Costs of repairing elevators, HVAC systems, lighting, etc.
- Security: Expenses for security personnel and surveillance systems.
- Utilities: Shared utility costs like water and electricity for common areas.
CAM charges are usually calculated on a pro-rata basis, meaning each tenant pays a portion of the total CAM costs relative to the amount of space they lease.
Types of Common Area Maintenance Charges
Here are some of the main types of CAM charges:
Fixed CAM Charges
These are predetermined expenses known at the start of the lease term.
Variable CAM Charges
These can fluctuate based on actual maintenance costs and are adjusted periodically, reflecting actual expenses incurred.
Net CAM Charges
Include operating expenses, taxes, and insurance directly passed through to tenants.
Special Considerations
Caps on CAM Charges
Some leases include a cap on annual increases in CAM charges, protecting tenants from significant year-to-year changes.
Exclusions and Inclusions
Leases may specify what expenses are excluded (like capital improvements) and included in CAM charges, often leading to complex negotiations between landlords and tenants.
Reconciliation
Annually, landlords may reconcile CAM charges and adjust for any overpayments or underpayments made by tenants throughout the year.
Historical Context
CAM charges became prominent with the growth of multi-tenant properties like shopping malls and office complexes in the mid-20th century. These charges helped distribute the burgeoning costs of property maintenance fairly among numerous tenants.
Applicability
Commercial Real Estate
Primarily used in commercial real estate leases, especially for shopping centers, office complexes, and industrial parks.
Residential Real Estate
Typically referred to as Homeowners Association (HOA) fees rather than CAM charges, though the underlying concept remains similar.
Comparisons
CAM Charges vs. Triple Net Lease
In a triple net lease (NNN), tenants pay CAM charges along with property taxes and insurance, covering nearly all expenses except for the building’s structural repairs.
Related Terms
- Gross Lease: A lease where the landlord covers all operating expenses.
- Operating Expenses: Costs associated with running a property.
- Homeowners Association (HOA) Fees: Similar fees applicable in residential communities.
Frequently Asked Questions (FAQs)
How are CAM charges calculated?
Typically, CAM charges are calculated based on the tenant’s share of the total leased area multiplied by the total CAM costs.
What do CAM charges cover?
CAM charges cover costs related to the maintenance, repair, and operation of common areas in a leased property.
Are CAM charges negotiable?
Yes, tenants and landlords can negotiate the specifics of CAM charges, including caps on increases and what expenses are included.
Can CAM charges change annually?
Yes, they can vary year-to-year based on actual maintenance costs. Some leases may include provisions to cap the annual increase.
References
- Gerald, Frank. “Commercial Real Estate Leasing: An In-Depth Guide.” Real Estate Press, 2018.
- “Understanding CAM Charges in Commercial Real Estate Leases.” American Bar Association, 2021.
- Clark, Raymond. “Effective Management of Office Complexes.” Property Management Journal, 2019.
Summary
Common Area Maintenance (CAM) Charges are essential for the upkeep of shared spaces in commercial properties, ensuring that these areas remain functional and aesthetically pleasing. Given their complexity, understanding and negotiating CAM charges are crucial for both landlords and tenants to ensure fair and manageable leasing agreements.
