Understanding Common Area Maintenance (CAM) Charges in a Commercial Lease
When you negotiate a commercial lease, you will likely hear CAM charges discussed. During lease negotiations, your rent is only one variable that can affect the deal. The common area maintenance fees (CAMs) that the landlord charges are also a significant part of occupancy costs. These charges have a significant impact on the property’s net operating income and how much tenants pay.
Disputes can arise with tenants when it comes to CAM charges so it is important for commercial landlords and tenants to have a thorough understanding of what CAM charges are/include and how to properly account for them in the lease,
Below, we discuss what CAM charges are, what is included in them, the types of commercial real estate leases that do and do not include them, and how they are calculated.
What are CAM Charges?
Common Area Maintenance (CAM) expenses are fees paid by tenants to landlords to help cover costs associated with overhead and operating expenses for common areas. Common areas are spaces used for or benefited by all tenants and include, but are not limited to, hallways, elevators, parking lots, lobbies, public bathrooms, landscaping and building security.
While CAM charges are very generally maintenance costs related to managing and maintaining commercial property, there really is no one definition as to what exactly is included in them as they vary based on the market and the property. CAM charges are designed to provide property owners with some protection from increasing costs so that the property’s return on investment isn’t significantly impacted. These charges typically include the cost of cleaning, maintaining, and repairing common areas of leased property, although the exact charges depend upon the exact lease that the landlord and tenant agree on. Understand what are controllable and uncontrollable CAM Charges.
It is important to understand the differences between Triple Net Leases, Modified Gross Leases, Full Service Gross Leases and areas in between. How are your Useable & Rentable square footages and Common Areas being calculated. What is being charged in CAM?
Why CAM Charges Matter for Tenants & Property Owners
The amount, timing, and payment of CAM charges matter for both the tenant and the property owner.
For tenants, CAM charges can be scary. While the landlord gets protection from fluctuating costs, the tenant may end up taking a hit when expenses rise. On the other hand, CAM fees can be a benefit to the tenant. Some landlords will put off certain maintenance and repairs if they have to bear the cost themselves. Passing these costs on to the tenants tends to make landlords less reluctant to keep up with maintenance. This ensures the tenant will have a clean, well-maintained space. As CAM charges can make up a significant portion of a tenant’s monthly rental expense it is important that they budget for both the monthly rent and CAM charges so they know what their total monthly expense will be.
For the property owner, CAM charges are important because they represent a reimbursed source of income that is used to pay for the property’s operating expenses. This limits the amount of money that has to come out of their own pocket.
Why Choose IPA Commercial Real Estate?
Choosing the right Commercial Broker and Property Manager can make real estate ownership a breeze. For people who own commercial and industrial properties, working with a respected company can be a great resource. With 30+ years of experience in the Inland Empire, the experience of the IPA Commercial Real Estate team provides a depth of knowledge of the market and full understating of the importance of the above issues.
Just like management in any other business, a respected brokerage and management company can monitor the care and financial requirements of any property. We can also help evaluate your rent structure. IPA Commercial Real Estate very focused on client properties and tenants and we have the skills and knowledge to make your ownership experience easy and pain-free.
We offer 24/7 Service from our team day or night! Call IPA COMMERCIAL REAL ESTATE at (951) 686-1462 to discuss how we can help you. Let us show you how to add value to your property.