What Are CAM Charges and How Do I Limit Them?

Recently I have received a lot of calls from people around the country who are astounded to receive bills from their Landlord for their commercial lease with huge increases in CAM charges.  So the question I am discussing in this blog post is quite relevant to many of my readers.  CAM is an acronym for Common Area Maintenance charges. CAM charges are those costs of the Landlord that are passed through to all the tenants on a pro-rata basis.  Typical CAM charges include repairs to the parking lot, common area electric and plumbing costs, roof repairs, maintenance fees, administrative charges, snow removal, etc.  If a prospective tenant does not negotiate a cap on these charges, they can go up exponentially each year.  My firm always attempts to negotiate a cap of a certain percentage that is the maximum increase in charges that can be charged to the tenant each year.  In addition, it is recommended that the lease clearly define what can and cannot be included in CAM charges.  Some items that we typically ask the Landlord to exclude (we have 28 items we ask be excluded) include costs of a capital nature, charges caused by other tenants or by the landlord or the landlord’s agents, costs which are depreciated, etc.  All of these mechanisms can help to keep CAM charges at a predictable amount.  It is also important that the tenant have the right to review (and if warranted, audit) the books and records of the landlord to see if there are inappropriate charges included in the CAM charges being passed through to the tenant.  One other concern is the percentage of administrative and maintenance charges being charged to the tenants.  Negotiating a lower percentage on these charges can save a tenant thousands of dollars.

What can you do if you are faced with exorbitantly high CAM charges?  If the lease did not provide you with a cap or exclusions to CAM or even the right to see the landlord’s books, there is not a lot that can be done to remedy escalating CAM charges.  Certainly it would be wise to ask the landlord to see the books and to provide an accounting. Any questionable charges would be further investigated and evaluated.

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