Confused About Commercial Leases and Common Area Maintenance Fees?
When reviewing a commercial lease, you likely will note the inclusion of common area maintenance (CAM) fees. CAM fee are extra charges that help the landlord pay for direct – and sometimes indirect – maintenance costs of specific areas that all tenants use or benefit from.
How are CAM fees applied?
CAM fees can be paid monthly, quarterly, yearly, or any time the landlord incurs costly repairs to the building or common areas. Also, CAM fees can rise faster or slower than your monthly lease rate, making them a financial unknown for the tenant.
You may be particularly interested in leasing a property that already includes CAM fees. But when you’re determining the total rent you’ll pay, you must determine whether these CAM fees are variable or fixed; and if they’re variable, whether a cap is included.
What are common areas?
Identifying common areas is the $60,000 question. Most common areas are divided into two categories:
- Internal areas: elevators, hallways, public bathrooms and lobbies
- External areas: parking lots, landscaping, fountains and patios
Maintaining these common areas can cost as little as a few bucks each month, or they can cost a small fortune. Replacing an elevator or repaving a parking lot, for instance, are major expenses that can inflate CAM fees.
How can you protect yourself from CAM costs?
Unfortunately, you can’t always anticipate all the problems a building or property may develop. But you can insist that landlords tell you when they last made major repairs, like to the roof or HVAC systems. This will give you some idea of when CAM fees likely may skyrocket. Also, make sure the landlord doesn’t slip in a vague reference to CAM fees in the lease; know what’s included in that category before signing. Specifically, ask whether CAM fees include the cost of any of the following:
- Security systems
- Exterior painting
We can help you better understand commercial leases and how CAM fees will affect the rent you’ll pay. Give us a call before you sign a commercial lease, which could end up costing you far more than you bargained for.