What Are Common Area Maintenance Charges In A Commercial Lease?
Posted with Permission from Spadea Lignana Franchise Attorneys
What Are Common Area Maintenance Charges In A Commercial Lease?
Most commercial retail leases are triple net leases. The “triple” stands for (i) taxes (ii) insurance and (iii) maintenance.
Taxes: This is pretty straightforward, as the landlord will simply pass on to the tenant the real estate taxes proportionately based on the size of the overall property and the size of the tenant’s location.
Insurance: This is calculated in a similar manner based on the landlord’s insurance cost for the overall property, not the tenant’s specific insurance.
Maintenance: This is the big variable and is also called CAM or “common area maintenance.”
Basically, under a triple net lease, the landlord will pass through all of the expenses to maintain the property including landscaping, cleanup, snow removal and minor repairs to each tenant on a pro-rata basis. The CAM charges in a commercial lease are typically added on to base rent as additional rent (in addition to the taxes and insurance cost). This is an area fraught with danger for the unwary tenant. A landlord typically will try to pass through as much of their expenses as possible through CAM charges, and if not negotiated upfront, these expenses can grow and grow over the life of the lease.
CAM charges to be wary of are:
Administrative & Maintenance Fees
Roof Repair & Replacement
Capital Improvements
Lighting
Plumbing
Electrical Wiring
HVAC
Many of these charges should be considered capital expenses or general overhead of the landlord and should be excluded from CAM.