What Does Common Area Maintenance Include?

Common Area Maintenance (CAM) is a key aspect of property management in commercial real estate, multi-unit residential buildings, and planned communities. It involves sharing costs for the upkeep and operation of spaces used by all occupants or tenants. Understanding CAM is important for anyone leasing or owning property, as these charges directly impact overall occupancy expenses.

Defining Common Area Maintenance

Common Area Maintenance refers to the costs incurred by a landlord or property owner for operating, maintaining, and repairing shared spaces and facilities within a property. These shared spaces, known as common areas, differ from the individual tenant spaces that are exclusively leased. CAM ensures the property remains functional, attractive, and safe. CAM responsibilities are outlined in lease agreements or homeowner association documents.

Components of Common Area Maintenance

The specific inclusions within Common Area Maintenance can vary depending on the property type and lease agreement. However, CAM charges generally cover a broad spectrum of services and expenses for the communal benefit of all tenants. These costs are categorized for clarity:

Utility expenses: Cover electricity, water, and gas consumed in common areas. This includes lighting, HVAC for shared spaces, and other common area utilities. For instance, the cost of lighting a common parking garage or maintaining the temperature in a shared building foyer would fall under this category.
Cleaning and janitorial services: Ensure cleanliness and hygiene in shared restrooms, hallways, and lobbies. This includes trash removal and general upkeep.
Landscaping and exterior maintenance: Cover outdoor spaces. This involves groundskeeping, such as mowing lawns, trimming shrubs, and maintaining irrigation systems. Snow removal from parking lots and walkways, along with general parking lot maintenance like resurfacing and line striping, are common inclusions.
Security measures: Protect the property and occupants. These include security personnel, alarm systems, and surveillance cameras for common areas.
Structural and systems maintenance: Addresses upkeep and repair of the building’s core components and shared infrastructure. This category covers maintenance for roofs, foundations, and shared HVAC systems that serve multiple tenants. Costs for maintaining and repairing elevators, common plumbing systems, and electrical infrastructure within shared spaces are typically included.
Administrative and management fees: Cover overseeing property operations. This includes property management fees, internal administrative costs, and sometimes a portion of property taxes and insurance for common areas.

How CAM Charges Are Determined

CAM charges are calculated and billed to tenants as outlined in the lease agreement. A common method determines a tenant’s pro-rata share based on their leased square footage relative to the property’s total rentable square footage. For example, if a tenant leases 5,000 square feet in a 50,000 square foot building, their pro-rata share would be 10% of the total CAM expenses. This ensures each tenant contributes proportionally to shared space upkeep.

Landlords commonly estimate CAM costs at the beginning of a fiscal period, usually a calendar year, and then bill tenants a monthly estimated amount. This allows for predictable budgeting. Each tenant’s monthly payment is calculated based on their pro-rata share of this estimate.

Some leases include a “base year” or “CAM stop” provision. A base year arrangement means the tenant pays only increases in CAM costs above a specified base year’s expenses. A CAM stop sets a fixed amount of CAM expenses the landlord covers, with the tenant paying costs exceeding that threshold. These methods protect tenants from escalating costs.

Lease agreements may also include caps on annual CAM increases, often expressed as a percentage. These limit how much a tenant’s CAM charges can rise from one year to the next. For instance, a lease might stipulate that CAM increases cannot exceed 3% to 5% annually. These provisions are designed to protect tenants from unpredictable spikes in expenses, allowing for more stable financial planning.

CAM Reconciliation

Common Area Maintenance reconciliation is an annual process where the property owner compares the actual CAM expenses incurred over a specific period, typically a calendar year, against the estimated payments collected from tenants. This “true-up” ensures tenants pay their precise pro-rata share of actual costs and adjusts for discrepancies.

If actual CAM costs exceed estimated payments, the tenant owes an additional amount. If estimated payments surpass actual costs, the landlord provides a credit or refund. This adjustment balances accounts, reflecting the true cost of common area maintenance.

The reconciliation is usually performed within a few months after the year-end, often within 60 to 120 days. Landlords provide tenants with a detailed statement outlining actual expenses, amounts paid, and any resulting balance or credit. This allows tenants to review charges and confirm accuracy.