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Typical examples of operational and maintenance costs include: The idea of course is that all tenants benefit from the upkeep of such areas, and so all tenants should contribute to the cost to do so.
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Notwithstanding the fact that CAM charges are entirely negotiable, they generally include only operating, repair and maintenance costs relating to a property’s common areas. What Kind of Expenses are Included in CAM Charges? Oh, and whatever method of calculation the parties agree on, they will generally want the right to confirm the actual footages before the dotted line has been inked. But figure that out before you finalize that budget and sign that lease. Are large tenants (e.g., those exceeding 30,000 s.f.) excluded from the calculation?.Are all tenants responsible for the same common area costs, or are there subsets of tenants who have to cover certain expenditures that only benefit them? (e.g., does everyone pay for utilities serving a common lunch room when only certain tenants can use it).Does the tenant’s square footage include the total footprint of its premises, or is unusable space excluded? How about non-selling space (e.g., storage areas, or basements)?.If against currently leased space, how often is the percentage recalculated to reflect the square footages of new or vacating tenants?.Is the tenant’s square footage measured against the property’s total leasable area or only the currently leased space?.The answer is, read the lease and see how the parties agreed to calculate the tenant’s share. What is this tenant’s pro rata share of the center’s CAM charges?Ĭongratulations! You’re right! Or… you’re wrong.A tenant occupies 4,000 square feet, then.If a shopping center has 100,000 square feet of leasable space, and.What is My Share?Ī tenant’s pro rata share is based on the square footage of the tenant’s use as compared to the square footage of the total property. To help avoid these kind of unpleasant surprises, this article explains the types of most expenses most often included in and excluded from CAM (and why each party thinks they should or shouldn’t), the importance of how calculate a tenant’s pro rata, how the risks of unanticipated charges can be shared (or shouldered by one party), and how tenants can confirm the costs ultimately paid represent the CAM charges they agreed to pay. Why is this a big deal? Well, when a tenant’s CAM charges can potentially add up to more than their base rent, and when it is vital to most business to be able to project their expenses with some certainty, neither landlords nor tenants can afford vague or poorly drafted language.
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While there are some generally accepted expense items (e.g., no one argues that snow removal of shared parking areas isn’t a legitimate CAM charge), and maybe an accepted principle or two (e.g., if an expense has virtually nothing to do with the operation, repair or maintenance of the property–like say, the landlord’s legal fees to set up an LLC to own the land–then that cost shouldn’t be passed on to tenants), but otherwise CAM charges simply are what the lease says they are.Īnd where a lease’s CAM sections are vague or poorly drafted, these common area maintenance charges can end up including many expenses tenants thought were out, or excluding many expenses landlords thought were in.
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And therein lies the danger to both parties. Well that’s a pretty good start, but let’s add one more category to possible CAM charges: anything the landlord and tenant agree to. Usually paid on a pro rata basis, to compensate the landlord for the costs of operating, repairing, and maintaining common areas. Common area maintenance charges, or CAM charges, are defined by USLegal as the fees: