What in the Heck is CAM?

Many commercial leases require tenants to pay CAM.

CAM is an acronym for Common Area Maintenance fees.  It is extremely important that you understand the CAM fees in your commercial lease and how they are both calculated and charged.  

CAM charges are often found in the same lease provision that discusses base rent charges.  When calculating your monthly payments, it is imperative that you include CAM, as it often adds a significant amount to your base rent charges.

In addition to base rent charges (which is the stated monthly rent), many commercial leases require the tenant (or lessee, as it is sometimes referred to) to pay their percentage share of CAM charges.  

Aside from the actual physical space being rented, there is exterior space maintained by the landlord, as well as administrative and carrying fees that Landlords commonly pass through to tenants in the form of a CAM fee.  Such costs may include such items as insurance premiums, real estate taxes, repairs, common area utility charges, maintenance, and salaries of the property’s employees.

CAM charges are passed along to the tenants according to their proportionate percentage share of the property.  

For example, if a commercial property totals 1,000,000 square feet and a particular tenant occupies rented space of 100,000 square feet, then that tenant would be responsible for 10% of the costs to maintain the common areas of the property.  The landlord would pass 10% of such costs along to that tenant in the form of a CAM charge.  This charge is ordinarily paid on a monthly basis as an addition to base rent charges.

Because CAM charges may be based upon fees not yet incurred by the Landlord and are therefore not predictable with certainty, they are often based upon the prior year’s charges with a percentage increase (for example, 3%).    

Some leases will include a ‘cap’ to limit the increases on a year-to-year basis.  A cap will limit the amount by which CAM charges may rise from the previous year.  The amount of any cap will be negotiated between the parties before signing the lease.  The larger the rented space, the more likely that a tenant will have room to negotiate CAM charges and any cap associated with CAM.

Understanding CAM charges and the other provisions of any commercial lease you are thinking of signing is extremely important. Having an attorney available to review or even to draft your commercial lease will help avoid conflicts and other problems down the road. Contact the Greenbaum Law Firm, P.A. to schedule a consultation today.

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Greenbaum Law Firm, P.A.

The Greenbaum Law Firm, P.A. is a boutique, client-centric law firm concentrating in the areas of business and corporate law, contracts and agreements, and real estate. Our unique approach to the practice of law consists of positioning our clients at the center of the legal practice and pursuing their objectives in the most efficient and transparent manner.

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