Leasing Office Space? Be Aware of “Common Area Maintenance” Charges
If you plan on leasing commercial office building space, you need to account for “common area maintenance” (CAM) charges included in your lease agreement. CAM charges mainly consist of maintenance fees for work done on the property’s common areas that you are responsible for paying your pro-rata share of. These fees are passed from the Landlord and calculated as a separate monthly cost, so it is important to ensure they are properly outlined in the lease agreement so you can project your expenses with some certainty.
What are common areas?
- Parking Garages
How are these fees calculated?
Typically, each tenant’s pro-rata share of the CAM fees is the percentage of the tenant’s rented space vs. the total square footage of the property. For example, if a retail store has 100,000 square feet of space and a tenant occupies 4,000 square feet, then the tenant’s pro-rata share of the CAM charges is 4%. However, every lease is different, so make sure you have a firm understanding for how your share is calculated.
What is considered maintenance of common areas?
CAM charges generally include non-capital items like operating, repair and maintenance costs relating to the common areas of the property. If a landlord wanted to install a new bathroom in your common area, that is not your burden to bear. However, you will indeed be responsible for the monthly cost to clean and maintain that bathroom.
Here are some examples of what CAM charges may include, that all tenants benefit from, and in-turn share in the cost:
- Repair and maintenance of parking lots
- Paint, wallpaper and carpeting
- Snow removal
- Trash removal
- Janitorial and pest control services
However, your lease may also include the costs of items you are not comfortable sharing. CAM charges are entirely negotiable, and it is proper to ask what the recent CAM costs have been for the space you are considering so you are aware of what specifically is included in the calculation of your share.
At the end of the year, you may also want to conduct an audit to determine whether the projected budget of CAM charges was too high or low and either obtain a credit or make up the difference. Either way, an audit allows you to get a better handle on what the CAM charges for your rented space is costing you each year, and that the charges are being allocated properly.
Regardless, when you are undergoing a new lease agreement, it is important to have a trusted group of professionals around you to properly guide you, advocate for you and help you understand all costs and risks. For more information on CAM charges and commercial property lease agreements, please reach out to Kevin J. Hansen at [email protected].