Understanding Common Area Maintenance (CAM) Fees and Expenses

Common Area Maintenance (CAM) fees are a crucial component of commercial real estate leases that tenants need to understand. These charges allow landlords to pass along the costs of maintaining shared spaces to their tenants. Let's dive into the key aspects of CAM fees and expenses.

What Are CAM Fees?

CAM fees cover the costs associated with operating and maintaining the common areas of a commercial property. These are spaces shared by all tenants, such as lobbies, elevators, parking lots, and landscaped areas.

What's Typically Included in CAM Charges?

While the specific items can vary depending on the property and lease agreement, common CAM expenses often include:

● Parking lot maintenance

● Landscaping and lawn care

● Snow removal

● Sidewalk upkeep

● Hallway cleaning and maintenance

● Shared bathroom maintenance

● Elevator maintenance

● Common area utilities (e.g., parking lot lighting)

It's important to note that CAM charges typically exclude property taxes and insurance, which are often billed separately.

How Are CAM Fees Calculated?

The most common method for calculating CAM fees is based on each tenant's pro rata share of the property's square footage. For example, if a tenant occupies 25% of the building's leasable area, they would be responsible for 25% of the total CAM expenses.

At the beginning of each year, property managers typically estimate the anticipated CAM expenses and divide them among tenants. These estimates are then reconciled with actual expenses at year-end.

CAM Fees vs. Operating Expenses

While CAM fees are a significant part of operating expenses, they are not the same thing. Operating expenses include all costs associated with running the building, including utilities, repairs, insurance, and property taxes. CAM fees specifically cover the shared areas and exclude certain items like property taxes and insurance.

Negotiating CAM Fees

While CAM fees themselves are generally not negotiable since they represent actual costs, tenants can negotiate certain aspects of how they're handled in the lease. Some strategies include:

Requesting detailed breakdowns of CAM charges

Negotiating caps on annual CAM increases

Excluding certain expenses from CAM calculations

Asking for the right to audit CAM charges

CAM Reconciliation

At the end of each year, landlords perform a CAM reconciliation. This process compares the estimated CAM charges paid by tenants throughout the year to the actual expenses incurred. If tenants overpaid, they receive a credit; if they underpaid, they owe the difference.

Why CAM Fees Matter

Understanding CAM fees is crucial for tenants to accurately budget their occupancy costs. These fees can significantly impact the overall cost of leasing a commercial space and can vary greatly from one property to another.

For landlords, efficiently managing CAM expenses can help maintain the property's value and ensure a fair distribution of costs among tenants. It's also an important factor in calculating a property's net operating income (NOI), which directly affects its market value.

In conclusion, CAM fees are an integral part of commercial real estate leases. Both tenants and landlords should have a clear understanding of what these fees cover, how they're calculated, and how they impact the overall cost of occupancy. By doing so, all parties can ensure a fair and transparent leasing arrangement.

If you have further questions on CAM fees or need more assistance in your commercial real estate journey, feel free to reach out to us at info@cbicommercial.com or 310-943-8530.