CAM charges, short for Common Area Maintenance charges, are a common feature in many commercial leases. They refer to the costs that property owners pass on to tenants for maintaining shared areas within the property. Understanding CAM charges and how they are outlined in any lease agreement is crucial before signing a contract. Let’s explore what CAM charges are and how they work.
What Does CAM Mean in Commercial Real Estate?
Common Area Maintenance (CAM) refers to an agreement between property owners and tenants regarding the management and maintenance of shared spaces in commercial buildings. These shared spaces are typically used by multiple tenants and are essential for the operation and appeal of the property.
CAM charges are the expenses landlords bill tenants for the upkeep of these shared areas. In some cases, CAM is also called “expense recoveries.”
Which Commercial Properties Use CAM Charges?
Not all commercial properties or leases include CAM charges. The terms for maintaining shared spaces vary and should be specified in each lease agreement. Some property owners handle all maintenance costs without charging tenants, while others pass these costs on.
For example, in a full-service lease, tenants pay a fixed amount that includes maintenance costs, utilities, taxes, and other expenses. In contrast, a net lease separates these costs, and tenants are responsible for CAM charges and additional property-related costs, lowering the property owner’s risk.
How to Calculate CAM Charges
CAM charges are typically calculated using the following formula:
(Square footage leased by tenant / Total leasable area of the building)×Total CAM for the building\text{(Square footage leased by tenant / Total leasable area of the building)} \times \text{Total CAM for the building}(Square footage leased by tenant / Total leasable area of the building)×Total CAM for the building
For instance, if a tenant leases 1,250 square feet in a 25,000-square-foot building with total CAM costs of $30,000, the tenant would pay 5% of the CAM costs, or $1,500.
CAM charges can be calculated either as a fixed fee or as a percentage of the total gross leasable area.
What Do CAM Charges Include?
CAM charges can cover a variety of maintenance costs, which may include:
- Irrigation and landscaping
- Lighting in common areas
- Parking lot maintenance
- Sidewalks and driveways
- Stormwater management
- Utilities for shared spaces
- Janitorial services
- Management fees
In retail or industrial spaces, CAM charges may also include administrative fees, delivery area upkeep, and other operational costs.
What Is Excluded from CAM Fees?
Typically, CAM charges do not cover expenses for the tenant’s specific leased space, property taxes, or insurance. However, leases may include terms that outline tenant responsibilities for taxes and insurance separately.
Is CAM the Same as Operating Expenses?
CAM and operating expenses are often used interchangeably, but they have slight differences. Operating expenses refer to the overall cost of running the building, while CAM charges specifically refer to what individual tenants pay for maintaining shared areas.
What Is CAM Reconciliation?
CAM reconciliation is the process of reviewing CAM charges at the end of a year to determine if tenants have overpaid or underpaid based on actual maintenance costs. If tenants overpaid, they may receive a refund; if they underpaid, they may owe additional fees.
Conclusion
CAM charges are a significant component of many commercial leases, covering the maintenance of shared spaces. Understanding how these charges work, how they are calculated, and the reconciliation process is essential for tenants when entering into lease agreements. Accurate assessment of CAM costs helps tenants budget appropriately and avoid surprises down the road.