What is CAM? - August, 2014
What is CAM? This is one of the most common questions I get when leasing commercial real estate. CAM stands for Common Area Maintenance fees. CAM is one of the three net charges included in a Triple Net Lease (NNN). The three N’s stand for: 1) CAM 2) Insurance and 3) Property Taxes. This is an additional rent that is added on top of the Base Rent. These numbers typically vary for each property depending on whether it is industrial, retail or office.
CAM is mainly a fee for the maintenance performed on the common areas of a property. Each tenant is required to pay its pro-rata share of the property’s total CAM Charges, which is the percentage of the square footage for each single tenant to the rentable square footage of the entire property.
Typically before signing a lease the tenant will request to view a breakdown of the CAM charges so it knows what it will be paying for and what exactly is included in those fees. Some examples of items included in CAM in most commercial buildings would be parking lot maintenance, landscaping, management fees and common area repairs. In an office building you might even see the electricity bills and janitorial fees included in CAM.
CAM fees should be divided into two separate categories:
- Uncontrollable Expenses – Often real estate tax, insurance and utilities.
- Controllable Expenses – All other expenses (as mentioned above).
The NNN fees are typically fixed and non-negotiable as far as the Landlord is concerned. The fees can fluctuate year to yearand sometimes the Landlord will agree to negotiate “capping” them. This can give the tenant a level of comfort to know that its fees will not rise astronomically to an uncomfortable level.
Since the CAM numbers are actually estimated annual numbers based on the property manager’s budgets, there can also be CAM reconciliations. These reconciliations are based on what the actual CAM numbers are versus what the tenant actually paid. After each year a review is done of the paid CAM versus the actual CAM charges. If the tenant over paid or under paid, the difference is reconciled.
CAM is very important aspect to the overall operation of each commercial property.The lease should clearly reflect both landlord and tenant obligations.