Understanding a CAM (Common Area Maintenance) Fee

Understanding a CAM (Common Area Maintenance) FeeUnderstanding a CAM (Common Area Maintenance) FeeIts important to understand exactly what youre paying for when you sign any commercial lease. Common area maintenance fees(CAM fees) are fairly common in commercial leases, but their terms can vary considerably. Be sure to ask questions about whats included in all fees that are padded into rent under the terms of your lease, and find out how those fees might increase each year. Some leases might cap rent increases to a reasonable percentage, but CAM fees might go up at a different percentage rate. Knowing what youllbe responsible for paying during each year of your lease will help you make better long-term decisions about whether a particular space will still be affordable in subsequent years, even if it seems like a good fit now. What Is CAM? Manycommercial real estateleases require that the tenant or lessee pay a portion of CAM fees. There are two basic calculations for CAM fees v ariable CAM fees,in which the amount a tenant is required to contribute increases based on a number of factors, and flat CAM fees,where the fees are a fixed amount. The term is typically used in conjunction with the leasing of retail and industrial spaces. You might also hear CAM fees referred to as a load factor when theyre combined with other fees. What Do CAM Fees Cover? CAM feesvary considerably and cover a wide range of expenses that landlords mustpay to keep the premises up and running. They might include repairs, insurance, property maintenance, and sometimes even the salaries of administrative staff when those employees contribute to running a business park. These salaries might be tagged as administrative fees. How Are CAM Fees Calculated? CAM expenses are typically calculated on a pro-rata basis. In simplest terms, the moreleasedsquare footage a tenant has, the greater the percentage of CAM expenses hell pay. Fees correspond with how much of the buildings total sq uare footage youre leasing, whether it be 10 percent or 50 percent. If you occupy 50 percent of the premises, the landlords expenses run $4,000 a month, and your CAM fees are variable, you can expect to pay $2,000 a month or half the overall expenses. It can be a very significant add-on. Is This Legal? The concept of CAM fees is typically legal, but remember that terms can differ a great deal from one lease to the next. The practice isnt widely accepted and embraced by industry professionals for this reason.You need to understand exactly what costs youll be contributing to, and youll want to ask for an itemization of those costs in writing. Make sure they stay within the lines of legality and consult an attorney whos well versed in commercial real estate law if you have any doubts. No blanket CAM definition specifies which costs can be included and which cannot. The frequency of payments can be an issue as well. CAM fees can be complicated and expensive, so its always advisabl e to have an attorney review any lease that includes CAM requirements or anyother special fee, even if youre pretty sure you understand the terms.