What Are CAM Fees?
Published At: Fri, 09/10/2021 - 00:46
There is a lot of industry jargon in commercial real estate. For those who are new to the business, it can be difficult to decipher what all the acronyms mean and how they apply to you.
One term that people often hear about is CAM fees or CAM charges. In this article, we will discuss what these charges are and their significance for commercial landlords and tenants alike.
What Is Common Area Maintenance?
Common area maintenance (CAM) is a set of charges for tenants of commercial property and other types of common interest communities to cover the associated costs with maintaining shared spaces/common areas. The cost varies depending on the property’s size and its amenities.
What Are CAM Charges?
CAM charges or fees are one of the three components that make up operating expenses when you buy or rent a property, along with insurance and property tax. These three components are often referred to as Triple Net (NNN) fees. CAM fees are paid by tenants to the landlords of the property to contribute to the expenses of the maintenance of common areas of the property (thus the name).
CAM’s are also sometimes called operational expenses. Landlords may take on all of these costs themselves, share them with tenants, or pass them all on to their tenants entirely. As a leaseholder, it is important to discuss the specifics of these fees with your landlord and, where possible, negotiate with them.
What Do CAM Charges Include?
CAM fees cover the maintenance of areas or facilities of the property. It can include landscaping, janitorial services, trash disposal, HVAC maintenance and replacement, and other administrative and operational costs as determined by the landlord and agreed upon by the tenant.
Other things that CAM fees can cover include:
- Electrical wiring
- Sewer maintenance
- Window washing/cleaning
- Lighting in common areas
- Parking lots
In the end, it all depends on the terms of CAM and how you discuss it with your tenant.
How Do You Calculate CAM Charges?
Usually, CAM charges are projected by the property manager. They estimate this based on their anticipated maintenance for common areas and other areas included in the agreement between the tenant and the landlord.
After that, the CAM estimate would be divided among the tenants in the building. Of course, if you are the property’s sole tenant, then there would be no need for this.
The formula for the CAM charge should look like this:
Annual CAM Expense (per tenant) = (Tenant Square Footage / Gross Leasable Area) x Total Estimate CAM of Property
After that, the result would then be divided into your monthly or quarterly expense so as not to burden the tenants with a hefty one-time fee.
At the end of the year, the property manager will audit the actual CAM expenses versus the projection at the beginning of the year. If the actual costs ended up being less than what was projected, the tenants would either be refunded or issued a credit equivalent to the excess amount (proportionate to what they paid for).
On the other hand, tenants would need to pay the excess amount if the actual expenses were bigger than the projection.
CAM vs NNN: Are They The Same?
CAM charges and NNN fees are not the same. While they may be charged together in some cases, there is a fundamental difference between these two. NNN fees, or Triple Net Lease Fees, refer to the extra costs that are charged to the tenant on top of the actual rental fee. These include property taxes, building insurance, and CAM fees. In essence, CAM fees are often a portion of NNN fees.
Are CAM Charges Negotiable?
The negotiability of your CAM fee would solely depend on the property manager and, ultimately, the landlord.
If you wish to negotiate with your landlord, some details you can talk about may include:
- what the common areas of the property are;
- if a part of the CAM calculator can be removed or reduced in cost; or
- if the projected maintenance costs for a facility are adjustable or not.
Are CAM Charges Legal?
CAM charges are legal obligations that can be included on top of the base rental fee, as long as both parties agree. As a tenant, you have the right to ask the landlord for detailed expenses and complete transparency regarding actual maintenance costs.
An audit gives the tenant a chance to analyze and better understand the landlord’s books to ensure that all the charges incurred under the CAM computation have been accounted for and that any excess or deficit would be calculated accurately.
Controllable VS Uncontrollable Expenses
Uncontrollable expenses are the fees that you have no control over. They include things like property taxes, insurance premiums, and utility bills. These costs differ from controllable expenses such as items purchased for rent or mortgage payments because they cannot be negotiated with your landlord or lender.
Are CAM Charges Included In All Lease Agreements?
No, not all leases include CAM charges. What you are paying for is determined by the type of lease you have.
What Is CAM Reconciliation?
CAM Reconciliation is the process of reconciling and balancing charges from a property management company to an owner or tenant. This means that tenants are not charged more than agreed upon in terms of services when signing their lease.
Before You Go
CAM charges are essential expenses you have to take care of if you are leasing a property. This is why it is important to know how much you need to pay and how the fees are calculated.
Having a sound understanding of your CAM fees requires effective communication with your landlord and the property manager.
If you wish to understand more about how CAM fees or other property fees work, or if you want to book for a leasing consultant, do not hesitate to reach out to us!