What Is Common Area Maintenance and What Does It Cover?

Common Area Maintenance (CAM) refers to the costs of operating and maintaining shared spaces within a property. These charges apply to commercial real estate and multi-unit residential settings, covering areas that benefit all occupants. Understanding CAM is important for tenants and property owners, as these expenses form a significant part of overall occupancy costs.

Defining Common Area Maintenance

Common Area Maintenance (CAM) covers costs incurred by a landlord or property owner for the upkeep, operation, and repair of shared areas. These spaces are not exclusively leased or owned by any single party. Common areas include hallways, lobbies, restrooms, parking lots, landscaping, and other amenities accessible to all. In commercial settings, these costs are typically passed to tenants as an additional expense beyond base rent. In residential settings, such as Homeowners’ Associations (HOAs), unit owners cover these expenses through regular assessments. CAM aims to distribute the expenses of shared amenities and infrastructure equitably among those who benefit.

Components of Common Area Maintenance

Common Area Maintenance expenses generally fall into several categories. Operational costs cover utilities for common areas, such as electricity, water, and gas for lighting or HVAC systems. Services include janitorial, cleaning, security personnel and systems, landscaping, snow removal, pest control, and trash removal. These routine services help ensure the property remains clean, safe, and functional for all occupants.

Maintenance and repair costs include routine repairs to shared infrastructure like roofs, parking lots, elevators, and HVAC systems. General upkeep of common restrooms, hallways, and lobbies also falls under this category. These expenses maintain the property’s current condition and address wear and tear.

Administrative costs directly related to managing CAM services may be included, such as property management fees or salaries for staff overseeing common area operations. Property insurance premiums for common areas, covering liability and property risks, are also a component of CAM. Property taxes attributable to common areas can also be passed through as part of CAM charges.

However, certain expenses are generally excluded from CAM charges. Capital improvements, which are enhancements that add significant value or extend the useful life of a property, are typically not included unless specifically outlined in the lease agreement. For example, a major lobby renovation that significantly upgrades its aesthetic beyond routine maintenance would generally be a capital improvement. Costs solely related to the landlord’s general business operations or expenses for spaces exclusively used by the landlord are also not part of CAM.

Calculating Common Area Maintenance Charges

The method for determining an individual tenant’s contribution to Common Area Maintenance charges is typically specified in lease agreements or HOA documents. The most prevalent approach is the pro-rata share method. Under this calculation, each tenant pays a percentage of the total CAM costs based on the size of their leased space relative to the total rentable space in the property. For example, if a tenant occupies 1,000 square feet in a property with 10,000 total leasable square feet, they would be responsible for 10% of the overall CAM expenses. The calculation involves dividing the tenant’s square footage by the property’s total leasable square footage and then multiplying that percentage by the total CAM expenses.

Another method is Fixed CAM, where a predetermined, unchanging amount is charged regardless of the actual costs incurred by the landlord. This provides predictability for the tenant but may not reflect actual fluctuating expenses. In some retail leases, CAM might be calculated as a percentage of the tenant’s gross sales. This aligns the tenant’s CAM contribution with their business volume. Transparency in the calculation and reporting of CAM charges is an important aspect of lease agreements.

Where Common Area Maintenance Applies

Common Area Maintenance charges apply in various real estate environments. They are a standard component of most commercial leases, including those for office buildings, retail centers, and industrial parks. In these settings, tenants typically pay CAM fees in addition to their base rent, covering the upkeep of shared facilities like parking lots, lobbies, and common restrooms. The specific terms and inclusions are detailed within the commercial lease agreement.

In residential contexts, Homeowners’ Associations (HOAs) and condominiums require unit owners to pay regular fees or assessments that cover common area maintenance. These fees fund the maintenance of shared facilities such as lobbies, gyms, swimming pools, exterior grounds, and building exteriors not individually owned. These assessments are crucial for preserving property values and ensuring the functionality of shared amenities. Mixed-use developments, which combine residential, commercial, and retail spaces, also feature CAM charges. In such properties, CAM allocation can be more complex, as different types of occupants may utilize common areas differently, necessitating careful delineation of costs.