Common Area Maintenance (CAM)

What is Common Area Maintenance (CAM)?

Common Area Maintenance (CAM) refers to the charge tenants pay to property owners or managers for maintaining and operating common areas within a commercial property. These charges cover various costs associated with services and conservation efforts required to keep shared spaces functional and attractive. CAM fees ensure common areas remain clean, safe, and accessible, contributing to the overall tenant experience.

Examples of Common Area Maintenance (CAM)

Shared Lobby Space: In a corporate office building, tenants are charged for the upkeep of shared lobby spaces. This includes cleaning, lighting, security services, and heating, ventilation, and air conditioning (HVAC) maintenance.
Parking Lot Maintenance: In retail centers, tenants contribute to the costs associated with maintaining parking lots. This includes resurfacing, snow removal, lighting, landscaping, and security patrols.
Restroom Upkeep: In a shopping mall, tenants share the costs of restroom cleaning, consumables restocking (like toilet paper and soap), and plumbing maintenance.

Frequently Asked Questions (FAQs)

1. How are CAM charges calculated?

CAM charges can be calculated in multiple ways, but they are usually based on the tenant’s proportional share of the common area space. Typical methods include using the gross leasable area (GLA) of each tenant’s space in relation to the total GLA.

2. What expenses are included in CAM charges?

Expenses often included in CAM charges are maintenance of elevators, escalators, landscaping, lighting, security, janitorial services, HVAC systems, and external building repairs.

3. Are CAM charges negotiable?

Yes, CAM charges can sometimes be negotiated, especially during the lease renewal process or initial lease agreement. Tenants can negotiate caps on CAM charges or exclusions for certain types of expenses.

4. Are CAM charges the same across all properties?

No, CAM charges vary widely depending on property type, location, usage, and the specific terms of the lease agreement.

Net Lease: A lease agreement where the tenant pays a base rent plus a portion of other costs, such as taxes, insurance, and maintenance.
Gross Lease: A lease agreement where the tenant pays a single lump sum for rent, and the landlord covers most or all property expenses.
Triple Net Lease (NNN Lease): A lease structure in which the tenant is responsible for paying three primary costs in addition to base rent: property taxes, insurance, and maintenance.
Pro Rata: A proportionate allocation, often used in calculating a tenant’s share of CAM expenses based on the portion of the total leased area they occupy.
Operating Expenses: Costs associated with maintaining and operating a property, including CAM, property taxes, and insurance.

Online Resources

References

“Real Estate Finance & Investments” by William B. Brueggeman and Jeffrey D. Fisher
“Principles of Real Estate Practice” by Stephen Mettling, David Cusic, and Jane Somers
“Commercial Real Estate Leasing: A Practical Guide” by Mark A. Senn

Suggested Books for Further Studies

“The Real Estate Investor’s Guide to Wheelbarrow Profits: How to Create Passive Income, Build Wealth, and Take Control of Your Destiny Through Multifamily Real Estate Investing” - by Jake Stenziano and Gino Barbaro
“Real Estate Market Analysis” - by Adrienne Schmitz
“Confessions of a Real Estate Entrepreneur: What It Takes to Win in High-Stakes Commercial Real Estate” - by James A. Randel
“Mastering the Art of Commercial Real Estate Investing: How to Successfully Build Wealth and Grow Passive Income from Your Rental Properties” - by Doug Marshall

Real Estate Basics: Common Area Maintenance (CAM) Fundamentals Quiz

### Which one of these is typically included in CAM charges? - [ ] Individual HVAC units within each tenant's space - [x] Maintenance of shared lobby spaces - [ ] Tenant-specific advertising expenses - [ ] Personal business insurance > **Explanation:** CAM charges generally cover maintenance of shared spaces, such as lobby areas, rather than tenant-specific costs like personal business insurance or individual unit HVAC systems. ### How are CAM charges most commonly calculated? - [ ] Based purely on tenant's annual revenue - [x] Based on the gross leasable area (GLA) of each tenant - [ ] Using a fixed rate applicable to all tenants equally - [ ] Randomly assigned percentages > **Explanation:** CAM charges are typically calculated based on each tenant's proportionate share of the gross leasable area (GLA) they occupy within the property. ### What is a typical negotiable aspect of CAM charges? - [ ] The base rent amount - [x] Caps on CAM charges - [ ] Standard office hours - [ ] Signage regulations > **Explanation:** One negotiable aspect of CAM charges is the potential to set caps or limits on the overall amount that can be charged to the tenant. ### Which of the following would not normally be covered by CAM charges? - [ ] Landscaping - [x] Tenant's personal utilities - [ ] Parking lot maintenance - [ ] Common area lighting > **Explanation:** CAM charges usually do not cover individual tenant’s personal utilities, as these are specific to the tenant’s private space. ### CAM charges ensure the upkeep of which areas? - [ ] Private office spaces - [x] Shared areas like restrooms and halls - [ ] Only tenant-specific improvements - [ ] Individual retail store’s inventory > **Explanation:** CAM charges cover the upkeep and maintenance of shared areas such as restrooms, hallways, and other communal spaces within the property. ### Who typically pays for CAM charges? - [ ] Only landlords - [ ] Property managers alone - [x] Tenants in the property - [ ] Local governments > **Explanation:** Tenants generally pay for CAM charges as part of their lease agreement to cover expenses for maintaining common areas. ### What type of lease most often involves CAM charges? - [ ] Gross Lease - [x] Triple Net Lease (NNN Lease) - [ ] Month-to-month rental agreement - [ ] Fixed term lease without expenses > **Explanation:** CAM charges are most commonly associated with Triple Net Leases (NNN Leases), where tenants pay for maintenance along with other expenses such as taxes and insurance. ### Which of these is a secondary cost besides base rent in a Triple Net Lease? - [ ] Annual sales commission - [ ] Tenant’s personal tax expenses - [x] Property taxes - [ ] Enforced service levies > **Explanation:** In a Triple Net Lease (NNN), tenants are responsible for secondary costs, including property taxes, insurance, and maintenance. ### What quality of a property dictates the complexity of its CAM fee? - [x] The type and size of shared spaces - [ ] The tenants' individual business types - [ ] Age of the building's main entrance - [ ] Degree of tenant turnovers > **Explanation:** The complexity and extent of shared areas like lobbies, hallways, and parking lots determine the makeup of the CAM fees. ### Who ultimately manages the common area services paid for through CAM charges? - [ ] Tenants themselves - [ ] Third-party retail vendors - [x] Property owners or managers - [ ] Resident peer groups > **Explanation:** Property owners or managers are responsible for managing the services and maintenance activities covered by CAM charges.