Common area maintenance (CAM) is a lease term that requires commercial retail tenants to pay toward operating shared spaces. These expenses usually cover parking lot repairs, landscaping, and other maintenance. Landlords generally split these costs among tenants based on the percentage of total floor space each tenant rents.
Commercial properties most likely to have CAM obligations include:
- Retail strip centers and shopping plazas
- Large enclosed regional and super-regional malls
- Mixed-use developments combining commercial and office spaces
- Commercial office structures housing multiple tenants
- Medical centers/health suites
- Industrial developments featuring shared loading docks and parking facilities
- Logistics parks sharing common access drives and truck yards
- Factory outlet shopping centers
- Supermarket-anchored commercial centers
- Power centers with major anchor retailers
- Multi-tenant flex industrial facilities
- Airport retail venues and terminal concession spaces
- Hospitality complexes containing shared facilities
- Shared workplace locations and co-working spaces
To be sure, CAM rules are standard in retail leases, but specific terms vary widely and directly impact a tenant’s total financial responsibility over time.
What Costs Fall Under CAM?
CAM fees typically cover what the landlord spends to manage and maintain shared property infrastructure. Common operating expenses include:
- Parking lot maintenance
- Lawn maintenance
- Parking lot lighting and shared utility bills
- Seasonal snow and ice removal
- Trash removal services
- On-site security features/guards
- Shopping center sign maintenance
- Janitorial cleaning for shared hallways and restrooms
- Professional property management fees
- Property insurance and real estate taxes
Some commercial leases also expand CAM fees to include major capital improvements, such as new roofs, asphalt replacements, or HVAC upgrades. This can cause sudden, significant cost increases for tenants.
How Are CAM Charges Calculated?
Most commercial leases divide operating costs proportionally by dividing a tenant’s square footage by the building’s total rentable space. For example, a tenant renting 2,000 square feet in a 20,000-square-foot retail center would pay 10 percent of the total CAM costs.
However, calculation methods can differ. Landlords might exclude large anchor stores from the total rentable space, which raises costs for smaller tenants. Additionally, how landlords handle vacant spaces and measure square footage can significantly change what tenants owe.
Key Terms to Negotiate
CAM terms require careful review during lease negotiations. Key provisions that help limit tenant risk include:
- CAM caps placing yearly limits on percentage increases for operating expenses to prevent unexpected fee spikes.
- Exclusions that prevent landlords from charging tenants for major building replacements, legal fees, or empty store spaces.
- Audit rights allowing tenants to inspect the landlord’s financial records and challenge incorrect charges.
- Base year terms for operating costs so tenants only pay for expense increases above that starting amount.
Common area fees are a major ongoing expense in commercial leases. Tenants who sign leases without carefully reviewing CAM definitions risk paying for major building improvements, inflated management fees, or expenses for unleased spaces.
If you are reviewing commercial leases or dealing with a real estate dispute in Texas, Porter Law Firm can examine your lease agreement and explain your legal options. Call today to schedule a confidential consultation.