Understanding CAM charges in a commercial rental agreement

On Behalf of | Jan 22, 2024 | Probate Litigation/Disputes

A commercial lease should provide you with a location to operate your business without problems. Unfortunately, some commercial leasing agreements are complex documents, which could invite conflict with a landlord over matters such as CAM charges.

CAM stands for common area maintenance, which refers to the operating costs involved in maintaining shared spaces in a property. CAM charges are not an unexpected part of a commercial leasing contract, so you should know how they work since your agreement may obligate you to pay some of these charges.

Examples of CAM charges

CAM charges cover various expenses including parking lot maintenance, landscaping, hallway lighting, elevator repairs and restroom cleaning. The costs you bear depend on your specific lease agreement. Your share usually stems from a calculation based on the square footage you rent in relation to the total building space.

Possible benefits of CAM charges

For business owners, CAM charges may seem concerning. You do not want unpredictable fees eating into your budget. However, CAM charges can provide some positives.

CAM charges allow landlords to keep base rent rates lower. Without CAM fees, they would have to charge higher rents to cover all operating expenses themselves. Also, by bearing some of the responsibilities of maintaining your location yourself, you can respond faster than your landlord to certain needs.

Negotiation is possible

When discussing your lease with your landlord, you may take steps to gain more control over CAM charges if your landlord is willing to make concessions. You could request a list of specific costs so you do not get hit with surprise fees. Caps on annual CAM increases and a right to audit CAM expenses could offer you more protection.

As a tenant, make sure your lease clearly defines your obligations. With some care taken upfront, CAM charges should not overwhelm your budget, and you will have a good chance to make your case in court if your landlord does not fulfill clearly defined terms in the contract.