CAM: Common Area Maintenance

Breaking down common area maintenance charges

What are common area maintenance expenses?

Common area maintenance (CAM) is one of the three main passthrough expenses in a Triple Net (NNN) Lease, with the other two expenses being insurance and property taxes. Common area maintenance expenses are paid by tenants to landlords and cover costs associated with building common areas. Common areas are benefited by all tenants in the building and typically include spaces such as lobbies, hallways, stairways, elevators, parking lots, and public restrooms. 

How are CAM fees calculated?

CAM fees are usually broken down in the lease to clearly define what they entail. Landlords or property managers typically forecast CAM expenses as a part of the annual budget and then proportionally divide the expenses amongst the tenants in the building. The percentage of the expense is typically divided by “pro-rata share” meaning it is calculated by dividing your square footage by the total leasable area of the building. Each tenant’s portion is then calculated into their monthly payment. 

At the end of the year, the landlord or property manager will reconcile the actual CAM expenses with the estimated expenses. If the actual CAM expenses are less than the estimated expenses, the tenants will be issued a credit for the difference. On the flip side, if the estimated CAM did not cover the actual costs then tenant’s will have to pay this difference as a lump sum. 

This is one reason why it is crucial to have a stellar property manager. Proactive property managers will anticipate overages and reforecast the estimated CAM expenses in order to save tenant’s the pain of paying a large unforeseen lump sum at the end of the year.

What is included in CAM expenses?

The items included in CAM expenses depend whether the lease is for an office, retail, or industrial property. While each lease is different, below you will find a chart outlining some examples of CAM expenses based upon lease type.

Why should you know about CAM expenses?

It is important to know what is included in CAM expenses in order to fully understand what it is that you are paying for in your monthly operating expenses. As previously mentioned, CAM expenses are based on estimates and are often not reconciled until the end of the year. At the end of the year, tenant’s receive a statement indicating the amount in which they have underpaid or overpaid, and will either receive credit back or owe the balance. Because CAM expenses include many indirect costs that are not easily identifiable, it is important to ask your landlord the exact expenses included in your lease.

Want to learn more? Give us a call at (805) 900-3000 or email us at team@champagneinc.com