Common Area Maintenance (CAM) – What Tenants Need to Know

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CAM, which stands for common area maintenance, refers to the expenses tenants pay to landlords of commercial properties. These payments are made to cover the cost of maintaining common areas. Understanding what CAM fees are can help tenants prevent overcharges when negotiating the terms of their commercial property lease and give better insight into how rent is calculated.

Usable area

This refers to the space that a tenant occupies in a commercial building. It typically includes office space, the reception area, restrooms, board rooms, lunch rooms, and any other area specifically designated for the business’ needs.

Usable area can be used to calculate the usable square footage of a space, which gives an indication of how much space the tenant will be paying for outside of common areas.

Common area

The common areas are shared spaces outside of the office you’ve leased. Examples include parking, public restrooms, lobbies, and gardens. Rentable square footage is a calculation of the usable square footage plus common areas of a commercial building. This calculation is often used to calculate a tenant’s annual base rent, as CAM reimbursements that a landlord collects for common area maintenance are factored into the equation.

What do CAM fees cover?

CAM fees cover common area operating costs, repairs and maintenance. This includes restrooms, roofs, and other structures on the commercial property. Other CAM costs (depending on your lease) can include security, insurance, advertising, legal costs, utilities, and more.

A tenant’s CAM fees are calculated by dividing the usable area by the rentable square footage and multiplying it by the commercial property’s total estimated annual CAM.

Commercial lease agreements and common area maintenance

A typical commercial lease agreement includes multiple sections that speak to CAM fees and common areas. Examples include a description of all common areas, assertions that the landlord will maintain the common areas, offer unlimited access to common areas and that areas are maintained by management.

Other important elements are common area rules and rent reduction or rent pause if the tenant is unable to access the building or common areas.

The pros and cons of paying for common area maintenance

One of the pros of paying CAM fees is that you’ll receive assurance that your common areas will be maintained by your landlord. You’ll also understand what exactly your CAM fees cover, which will help you plan your finances so that you don’t go over budget.

The cons of paying CAM fees is that they are paid in addition to rent, they may not cover all costs of maintaining the commercial property, and the payment options vary depending on the type of lease you sign.

Although CAM fees are an additional expense on top of rent, understanding what they are can help tenants better understand their annual base rent, be clear about what structures in the commercial building they cover, and easily negotiate the terms of their lease agreement prior to signing.

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