Thursday, September 22, 2016

Real Estate & Related Terms Explained: CAM

Next up in our series on explaining real estate and related terms is another about commercial leasing. The term is actually an acronym and the concept ties into additional rent, which we discussed last week.

What is CAM?
CAM stands for common area maintenance. CAM comes into play in a multi-unit property where tenants share a common area(s). This common area can include common hallways, elevators, parking lot, landscaping area, utility rooms, common restrooms, and more.

How are CAM charges administered?
CAM charges are usually administered as part of the additional rent. Each tenant pays their proportionate share of the common area maintenance charges. Generally they come up with a figure per sq ft (ie. $2.00/ft, which would be the tenant’s share of common area maintenance for the year).  This budgeted CAM cost is usually billed monthly based on the budget and then reconciled with actual expenses at year end.

What else should I know about CAM?
CAM charges are sometimes advertised totalled with property taxes to give you a total additional rent figure. Sometimes they are advertised separate where they disclose a property tax number, plus a CAM number (ie. $5.00/ft for taxes and $2.00/ft for CAM total $7.00/ft additional rent). Certain types of properties will have higher CAM costs than others. A 20 storey office tower with several elevators and lots of common hallways and facilities will have higher maintenance costs than a small strip plaza with minimal parking and no common entrances or hallways. Sometimes CAM can also include a management or administrative cost to administer the bookkeeping of the common area maintenance and additional rent. This should be apparent when viewing the operating cost budget.

CAMs are another confusing topic for many people. Its important to understand what common areas you are responsible for as a tenant, what the maintenance of these areas is costing you, and what you are getting for those charges. Don’t be afraid to ask questions!

No comments:

Post a Comment