Common Area Maintenance (CAM) costs can be a major expense for business’s renting commercial real estate, often to their surprise. While there are a lot of negotiation points in a lease that affect CAM costs, here are three general principles for keeping your CAM costs manageable, as suggested in the article “Avoid Common Area Maintenance (CAM) Cost Surprises”:
#1 Know Who is Really Paying
While you and your landlord might have established in the lease who is immediately responsible for certain costs, be wary about the ways costs can come back to you in different forms—such as through high CAM fees. Read the lease thoroughly to make sure you are not paying double for anything and to check that all costs seem reasonable.
#2 Understand the Management Fee
Oftentimes you will have to pay a fee based on a certain percentage of your gross payments or some other calculation that goes towards property management – salaries and overhead for people on the property management team. This cost might be unavoidable, but make sure you clearly understand how your landlord is calculating the percentage to check to see that they are not overcharging you. You will want to make sure that the salaries are not also included in your CAM fees, which would mean you are paying double. Be sure to carefully analyze the language describing additional costs to make sure it is reasonable, then factor in what this percentage management fee means for your true cost of rent.
#3 Negotiate for Caps
If there is no way around certain costs, make sure that you at least a set a limit on how much the landlord can charge you, because if not, they have no real reason to keep those costs down. To keep a landlord transparent, see if you can get a copy of a budget of CAM expenses for a first year. You might also ask for an approval process if a landlord’s spending exceeds a specified cap, or simply state that the landlord is responsible for all costs beyond a certain amount. If you would prefer consistency, consider negotiating for a flat fee, rather than reimbursing a landlord for occasional expenses. It is a gamble as to whether or not this will save you money, but it will at least allow you to plan your budget accordingly.
CAM fees have a major effect on the actual cost of your rent, so make sure you understand them completely!