What Is CAM in Rent? Common Area Maintenance Explained

Understanding Common Area Maintenance (CAM)

Common Area Maintenance (CAM) refers to the costs associated with the upkeep and operation of shared spaces within a commercial property. These charges are a standard component of many commercial leases, representing a tenant’s proportional share of expenses incurred by the landlord to maintain areas benefiting all occupants. Understanding CAM is important for any business considering a commercial lease, as these charges contribute to the overall occupancy cost beyond the base rent. It ensures that the shared infrastructure and amenities of a property remain well-maintained for the benefit and safety of all tenants and their patrons.

Typical Costs Included in CAM

CAM charges encompass a variety of expenses necessary to maintain and operate the common areas of a commercial property. These typically include costs for routine maintenance and repairs, such as landscaping services for outdoor areas and resurfacing or repairs for parking lots. Other common maintenance items involve exterior lighting upkeep, snow removal, and the maintenance of common area HVAC systems. Janitorial services for lobbies, hallways, and shared restrooms are also frequently covered under CAM.

Utility expenses for common areas, such as electricity for corridor lighting, parking lot illumination, and water and sewer services for shared restrooms, are usually included. Security costs, covering personnel and surveillance systems in common areas, also fall under CAM. Some leases might include a small percentage for administrative or property management fees directly related to overseeing these common area services. The specific items included in CAM are always defined within the lease agreement and can vary significantly.

Calculating and Billing CAM Charges

A tenant’s individual CAM charge is typically determined by their pro-rata share of the total common area expenses. This share is calculated based on the percentage of the total rentable square footage the tenant occupies within the building. For instance, if a tenant leases 1,000 square feet in a 10,000 square foot commercial property, they would be responsible for 10% of the total CAM expenses.

Landlords commonly estimate the annual CAM expenses at the beginning of a fiscal year and then bill tenants a monthly estimated amount alongside their base rent. At the end of the year, a process known as “CAM reconciliation” occurs. During this reconciliation, actual CAM expenses incurred are compared against the estimated amounts billed throughout the year. If the actual expenses exceed the estimates, tenants may owe an additional payment to cover the shortfall; conversely, if estimates were higher than actual costs, tenants might receive a credit or refund.

CAM and Different Commercial Lease Types

In a gross lease, often referred to as a full-service lease, the tenant pays a single, all-inclusive rent payment. Under this arrangement, the landlord is responsible for all operating expenses, including CAM, with these costs being effectively built into the base rent amount, rather than itemized separately.

A modified gross lease represents a hybrid model, where the tenant pays a base rent plus some, but not all, operating expenses. In this lease type, CAM might be charged as a separate expense, or certain components of CAM could be included within the base rent while others are passed through as additional charges. The specifics of what is included or excluded are negotiated and detailed in the lease.

Net leases, including single net (N), double net (NN), and triple net (NNN) leases, structure CAM charges differently. In a triple net (NNN) lease, the tenant typically pays a lower base rent but assumes responsibility for their pro-rata share of property taxes, building insurance, and Common Area Maintenance. While single and double net leases also involve tenants paying some operating costs beyond base rent, the triple net lease places the broadest responsibility for these expenses, including CAM, directly on the tenant.