Debunking the Common Common Area Maintenance (CAM) Myths

In this article, you'll discover:

• The real differences between CAM and operating expenses
• How CAM charges are calculated and what determines your share
• Why your lease type matters for CAM responsibilities
• Ways to take control of CAM budgets and avoid hidden fees
• How a True Tenant Rep™ can help you secure better CAM terms

Common area maintenance (CAM) is more than just an additional cost on your lease agreement. It's a critical aspect that can impact your bottom line and overall satisfaction as a tenant.

By debunking the common myths, office tenants can empower themselves with the knowledge to optimize office space experience, gain a deeper understanding of CAM fees, and actively participate in the process to strengthen their leases and overall portfolios.

So join us as we dive into the lesser-known aspects of common area maintenance by exploring some common myths and misconceptions.

Myth: CAM Expenses Only Cover Maintenance and Cleaning

Depending on the type of commercial space you lease, what is included in CAM may differ, however it is typical to see the following outlined as charges in your lease: 

• Parking lot maintenance 
• Lawn care and landscaping  
• Snow removal  
• Sidewalks 
• Hallways 
• Bathrooms 
• Elevators 
• Common Area Utilities (i.e.: parking lot lighting) 
  
  

All tenants must pay a share of the upkeep and maintenance. Maintenance is the cost of running the common areas of the building. It includes everything from the power bill to light the hallways to the cost of sweeping the parking lot. So maintenance and cleaning can refer to a wide range of services.  

Myth: CAM and Operating Expenses are the Same

The operating expenses are the cost of operating the building. They include: 

• Utilities 
• Repairs 
• Insurance 
• Property tax 
• Management fees 
• Among other things 

On the other hand, Common Area Maintenance is similar but only applies to the cost of running shared features. CAMs also exclude property tax and insurance. This means that it's common to hear your reimbursements described as "CAM, Tax and Insurance," which is another way of saying that you'll pay your share of the building's entire operating expenses. 

To learn other key factors to get the best office space, watch our free office space video course. 

Myth: Common Area Charges are the Landlord’s Responsibility

The truth is that your responsibility to deal with CAM directly will depend on your leasing type.

Triple Net Leases

In a triple net lease, tenants are responsible for paying their share of CAM charges directly. So the expenses associated with common area maintenance, including utilities, maintenance, insurance, and property taxes, are passed on to the tenant separately from the base rent. 

With this agreement, the tenant pays the landlord a lower initial base rent because they pay for any other expenses directly. They also have more control over managing and monitoring these expenses.

The landlord has little to no responsibility to cover CAM charges. The negative of this is that the tenant now has more to manage for a singular lease and this can be not ideal, especially if the tenant has a larger portfolio.

Full-Service Leases

In a full-service lease, CAM charges are typically included as part of the overall rent. The landlord covers the expenses related to common area maintenance, such as cleaning, repairs, landscaping, and security. Tenants enjoy the convenience of having these costs bundled into their lease payment.

In turn, the landlord will usually charge some management fee. This, if anything, is the cost that should be monitored because there is little landlords can do about the other charges which are specific to vendors. 

Myth: All Tenants in Multi-Tenant Buildings Pay the Same CAM

To determine your CAM payment, landlords determine your pro-rata share based on the proportion of space you occupy in the building.

Pro-rata share plays a significant role in the calculation of common area maintenance (CAM) charges. It refers to the portion or percentage of the total CAM expenses that a tenant is responsible for based on their leased space's size relative to the entire building. The pro-rata share is determined by dividing the tenant's rentable square footage by the total rentable square footage of the building. This ensures that each tenant contributes to CAM expenses proportionate to their occupancy, promoting fairness in cost allocation. Understanding your pro-rata share is crucial for accurate CAM cost estimation and budgeting purposes.

Myth: CAM Charges are Fixed Throughout the Lease’s Lifespan

CAM charges are usually calculated using a base year approach. Under this approach, a specific year, known as the base year, is selected as a reference point for determining CAM costs. During the base year, the landlord calculates the total CAM expenses for the building.

In subsequent years, tenants are responsible for their share of any increases in CAM expenses above the base year amount. The CAM charges are adjusted based on the percentage increase in expenses compared to the base year. This approach ensures that tenants only pay for the increase in CAM costs, rather than the entire amount.

Myth: Tenants Have No Control Over CAM budgets

As a corporate tenant, you always have leverage to assert your rights and preferences in leasing discussions. Understanding your position and engaging in constructive dialogue with your landlord is key to influencing budget decisions.

Common area maintenance can quickly become an expensive part of your lease if it wasn’t properly negotiated or outlined to protect your interest. This is especially true for full-service leases where the tenant can advocate for a cap to their cam charges.

A great Tenant Rep will help you cap the CAM charges to assure they are within the realm of reason. This provision keeps an upper limit on CAM charges, thus protecting your budget from excessive fees. Caps can be either compounded or cumulative and are typically expressed as a percentage of the total charge.  

Tenants can also take action to request transparency in CAM calculations. Ask for detailed breakdowns of CAM charges to ensure accuracy and prevent any hidden or excessive fees. This can include requesting supporting documents and invoices for CAM expenses. Be sure to start by verifying the following:

• What standard (if any) was used to determine how to measure your space. For example, there is the BOMA Standard, ironically from the Building Owners and Management Association (BOMA) which is actually pretty fair. Funny enough, a lot of landlords don’t like it.  Go figure. 
• The size of your space (in usable square feet). 
• The total usable square footage of the building.
• The total common area space of the building. 

Also, be sure to clearly define what expenses are considered CAM and ensure they align with industry standards. Negotiate to exclude any unreasonable or unrelated expenses that may be included in the initial proposal.

Before signing your lease, also negotiate for the right to audit CAM expenses periodically. This allows tenants to verify that the charges are in line with the lease agreement and ensure proper accounting practices are followed.

Myth: Tenant Representation Doesn’t Make the Difference in Negotiating CAM

As with any other lease terms, CAM clauses are often shrouded in nuance and industry jargon. It can be difficult to know if your landlord is offering you a good deal unless you’ve been around the block a few times. So, don’t leave anything to chance. Increase the likelihood of getting your optimal CAM clause by working with an industry expert who only has a fiduciary to get you the best deal, a True Tenant Rep™. 

A True Tenant Rep™ specializes in commercial leasing and has a deep understanding of CAM provisions and industry practices. They are familiar with common CAM expenses, calculations, and potential pitfalls. Their expertise enables them to navigate complex lease agreements and CAM negotiations.

By working with a True Tenant Rep™, tenants can potentially secure lower CAM charges and favorable terms, leading to cost savings over the lease term. A True Tenant Rep™ can also identify potential risks and negotiate safeguards, such as cost control measures and audit rights, to mitigate the risk of inflated or unjustified CAM expenses.

True Tenant Reps only represent tenants. This means they can improve your CRE portfolio or individual leases through unbiased and dedicated service. At iOptimize Realty we are True Tenant Reps™ with over three decades of experience ensuring the CAM charges of our corporate tenants benefit their budget.

We have put our 3+ decades of expertise in the free course below to empower corporate tenants to find the best office space for the best price and terms on the market. Enroll today!