On behalf of Michael Brooks of Law Offices of Michael A. Brooks posted in blog on Friday, December 29, 2017.
Before signing a commercial lease, understand that you may be paying for more than just the square footage your facility will occupy. Your lease may have common area maintenance (CAM) fees. These can also be referred to as load factor.
CAM fees are common when you lease in a multi-tenant business park. You are not leasing the whole property, just a portion, so the CAM fees represent the cost of a portion of the building to be maintained. The only guaranteed way to avoid CAM fees is to lease a single tenant property, but then you can be responsible for all the operation expenses instead of just a portion.
What do CAM fees cover?
CAM fees can cover all kinds of expenses that the landlord must pay for basic upkeep and to maintain premise functionality. These can include repairs, insurance, property maintenance, trash removal, lawn care, and any utilities not separately metered. The fees can also be used to create reserves for future large scale maintenance and repairs, such as repaving a parking lot.
How are CAM fees calculated?
CAM fees are pro rata, meaning the allocation of fees is proportionate to the amount of space. If you rent more square footage, your CAM fees will be higher to correspond with the larger space.
There are two types of CAM fees, flat and variable. A flat CAM fee will be a fixed amount, whereas with variable CAM fees the amount the tenant must pay increases with different factors. CAM fees can be paid monthly, quarterly, annually or other ways depending on the lease agreement.
When considering a commercial lease with CAM fees you may want to make sure to ask what you will be paying for and request an itemized list of the expenses if possible. Any expenses you will be paying for in CAM fees need to be verifiable, so asking for an inventoried breakdown of the expenses is reasonable. Also, you may want to ask about potential CAM fee increases. Having all the facts upfront can allow you to make an informed decision before signing a lease.