Understanding Common Area Maintenance (CAM) Charges in U.S. Commercial Leases

Answer

When renting commercial real estate in the United States, tenants often encounter an additional expense known as a Common Area Maintenance (CAM) charge. This cost is added on top of the base rent and is meant to cover shared expenses associated with operating and maintaining the property. While it may sound straightforward, CAM charges can vary significantly from one lease to another, and understanding how they work is essential before signing any agreement.

In most cases, CAM charges apply to multi-tenant properties such as office buildings, shopping centers, or industrial parks. These fees typically include the costs of maintaining lobbies, hallways, elevators, restrooms, landscaping, parking lots, and other areas that all tenants use. They may also cover security services, cleaning, snow removal, and certain administrative expenses related to property management.

Types of CAM charges usually include:

• Maintenance and repairs — routine upkeep of shared spaces, HVAC systems, lighting, and exterior elements.
• Utilities for common areas — electricity, water, or heating and cooling for hallways, bathrooms, and shared facilities.
• Security and safety — surveillance systems, guards, and fire protection systems.
• Landscaping and cleaning — lawn care, snow removal, trash disposal, and janitorial services.
• Administrative and management costs — salaries of property managers, accounting, or legal compliance fees.

CAM charges are usually calculated as a tenant’s pro-rata share of the total expenses, based on the percentage of space they occupy within the property. For example, if a tenant rents 10% of the total leasable square footage, they will typically be responsible for 10% of the overall CAM expenses. However, lease agreements can differ in how they define and allocate these costs. Some contracts set caps on annual increases, while others pass through nearly all operating costs to tenants.

It’s also important to understand the distinction between “controllable” and “non-controllable” CAM costs. Controllable expenses may include landscaping or janitorial services, while non-controllable ones often involve insurance premiums, property taxes, or government-imposed fees. Tenants should review whether the lease limits increases in controllable costs, as this can have a significant impact on long-term affordability.

Because CAM provisions can be complex, prospective tenants should request a detailed breakdown of these expenses before committing to a lease. Comparing the landlord’s estimates with actual historical expenses can help identify whether the charges are reasonable. It is also common to ask for an annual reconciliation statement showing the difference between projected and actual costs, with adjustments made accordingly.

In summary, CAM charges are an essential component of commercial leasing in the U.S., covering the upkeep and operation of shared spaces. While they can add substantial costs to rent, understanding how they are calculated and what they include allows tenants to budget more accurately and avoid surprises. Before entering into any agreement, it’s advisable to review the CAM provisions carefully with a licensed attorney or commercial real estate professional.