Common Area Maintenance: 101

Common Area Maintenance: 101

As a commercial property owner, it’s essential to understand all the expenses you’re responsible for, including Common Area Maintenance (CAM) fees. CAM fees are charges paid by tenants, which cover the maintenance and upkeep of common areas within the building. But, how exactly do these fees work, and what expenses do they cover? In this comprehensive guide, we will break down everything you need to know about Common Area Maintenance fees.

What Is Common Area Maintenance (CAM)?

Common Area Maintenance or CAM is a fee assessed to tenants in commercial properties, which covers the cost of maintaining all the common areas that the tenants share. Common areas may include elevators, lobbies, parking lots, hallways, restrooms, outdoor spaces, and more, depending on the building. CAM charges are typically a fixed amount or based on the tenant’s pro-rata share of the property. Moreover, CAM costs are usually in addition to the base rent, so property owners can increase their revenue without raising the rental rates.

What Does Common Area Maintenance Cover?

CAM fees typically cover expenses related to the maintenance, operation, and repair of all the common areas. Common expenses associated with CAM include janitorial services, snow removal, landscaping, pest control, fire and life safety systems, security systems, and more. Specific details of which expenses are covered by CAM vary by the property and building management. It is essential to read lease agreements thoroughly to understand all the costs associated with running a commercial property.

How Are Common Area Maintenance Fees Calculated?

There are two primary types of CAM fee calculations: fixed or variable. In a fixed CAM fee calculation, the tenant pays a flat rate of CAM charges per month. With a variable CAM fee calculation, the tenant pays for their share of the CAM charges based on the proportion of space they lease, also known as pro-rata share. The landlord usually calculates this by dividing the amount of leasable common area space by the total leasable square footage in the building. For example, if a tenant is leasing 1,000 square feet of a 10,000 square foot building, the CAM amount would be 10%. Thus, the tenant would be responsible for 10% of the CAM expenses.

Negotiating CAM Fees

There is always room for negotiation when it comes to CAM expenses. To negotiate on CAM fees, tenants can approach landlords or property managers with practical alternatives. One such alternative is a reduced CAM fee for an extended lease slightly below the market rate. Landlords may agree to an extended lease period in exchange for a lower CAM fee. Tenants can also include CAM fee caps in the lease negotiation to prevent exponential expense increases. Before negotiating, tenants should evaluate their lease contract carefully to understand whether the CAM expenses are capped or not.

As a commercial property owner or landlord, understanding everything about Common Area Maintenance fees and what it covers can help you stay informed and protect you from unwanted legal disputes. Common Area Maintenance fees are crucial for maintaining the overall aesthetic appeal of any commercial property. Ultimately, CAM expenses should be calculated correctly, and both landlords and tenants should be willing to negotiate reasonably to arrive at a fair agreement. By understanding the ins-and-outs of CAM fees, commercial property owners can keep their properties in excellent shape and fewer headaches.

CAM reconciliation is notorious for taking owners weeks if not months to complete at the beginning of each year. Did you know with STRATAFOLIO you can complete CAM reconciliation in one click? Contact us for a demo and ask us about our easy CAM process.

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