Business Process Services

Understanding CAM charges and how they impact landlords and tenants

16 August 2023

As a landlord or tenant, you’ve likely encountered the term “CAM charges” while managing your real estate lease. But what exactly are they, and how do they impact both parties involved? Fear not, for we are here to demystify this essential aspect of lease management, sprinkling in a bit of wit along the way.

Dive into the world of Common Area Maintenance (CAM) charges with us as we break down their significance in the real estate realm. Our expertise in lease management services at PreludeSys ensures you’ll walk away with valuable insights and cost-saving tips, all wrapped up in industry-specific lingo that’s easy to digest. So, grab your favorite beverage, sit back, and let’s unravel the CAM conundrum together.

What are Common Area Maintenance (CAM) Charges, and why do they exist?

Under the spotlight, we have Common Area Maintenance (CAM) charges- the unsung heroes of real estate leases. CAM charges are like the MVPs (Most Valuable Players) of property maintenance costs. In a nutshell, CAM charges are fees shared between landlords and tenants to cover the expenses of maintaining common areas in a commercial property. Think of them as the behind-the-scenes crew that keeps your building’s shared spaces in tip-top shape. These areas may include hallways, parking lots, restrooms, elevators, lobbies, and landscaping—all essential elements that create a welcoming environment for customers and employees alike.

But why do CAM charges exist? Maintaining these shared spaces is crucial for the property’s overall appeal and functionality. Landlords and tenants benefit from well-kept common areas, which ultimately contribute to business success and property value. By sharing the financial responsibility through charges, everyone involved can enjoy a well-maintained property without breaking the bank.

Items Covered Under CAM Charges

Here are some common expenses typically included in these fees:

  • Cleaning and janitorial services: Keep shared spaces clean for everyone’s enjoyment.
  • Landscaping and grounds maintenance: Ensure the property’s exterior remains attractive and inviting.
  • Utilities: Cover the cost of lighting, heating, and cooling in common areas.
  • Trash removal: Dispose of waste to maintain a sanitary environment.
  • Security services: Safeguard the property and its occupants with measures such as surveillance cameras and security personnel.
  • Parking lot maintenance: Provide well-kept parking facilities, including snow removal and repaving when necessary.
  • Elevator and escalator maintenance: Ensure smooth and reliable vertical transportation for all building users.
  • General repairs: Address wear and tear in common areas to maintain functionality and appeal.

Specific charges may vary depending on the property and lease agreement. Landlords and tenants should carefully review their contracts to understand which expenses are included and how they’re allocated.

An explanation of the difference between Triple Net Lease (NNN) and Gross Lease

As we venture further into the realm of commercial real estate leases, it is crucial to understand the distinction between two common lease structures: Triple Net Lease (NNN) and Gross Lease.

  • Triple Net Lease (NNN): In this lease structure, tenants are responsible for paying not only their base rent but also a portion of the property taxes, insurance, and CAM charges. The NNN lease ensures tenants contribute to the ongoing expenses of maintaining the property, making it a popular choice among landlords. As a result, the base rent in an NNN lease is typically lower than a Gross Lease.
  • Gross Lease: Conversely, a Gross Lease requires tenants to pay a single, all-inclusive rent amount, which covers their share of property taxes, insurance, and CAM charges. In this scenario, the landlord manages these expenses and ensures proper allocation. Tenants may prefer Gross Leases for their simplicity and ease of budgeting, as they don’t have to worry about fluctuating property expenses.

The critical difference between a Triple Net Lease and a Gross Lease lies in how property expenses, including CAM charges, are allocated between landlords and tenants.

How CAM Charges Impact Landlords and Tenants

For landlords, CAM charges play a vital role in property management. By passing on a portion of the maintenance costs to tenants, landlords can maintain their properties more effectively without shouldering the entire financial burden. This shared responsibility allows for better upkeep of common areas, ultimately enhancing the property’s value and desirability.

On the flip side, tenants also benefit from CAM charges. While they contribute to the maintenance costs of shared spaces, they enjoy access to well-maintained facilities that positively impact customers and staff. Plus, It often lead to more transparent and predictable expenses, making it easier for tenants to budget their operational costs accurately.

CAM charges foster a mutually beneficial relationship between landlords and tenants. By sharing the responsibility of maintaining common areas, both parties can focus on their core businesses while enjoying the perks of a well-kept commercial property.

Common Disputes Involving CAM Charges

As much as we’d like to believe that CAM charges always lead to harmonious partnerships between landlords and tenants, disputes can sometimes arise.

One common dispute involves improper payment of CAM costs by tenants. Tenants may underpay or delay their CAM charge payments, which can strain the landlord-tenant relationship and impact the property’s maintenance. To avoid this, both parties should ensure clear communication regarding payment schedules and amounts while keeping accurate records of all transactions.

Another frequent issue arises when landlords wrongly bill tenants for CAM charges. It occurs due to incorrect calculations, misallocating expenses, or even billing for items not covered under the lease agreement. To prevent such disputes, tenants should thoroughly review their lease terms and request a detailed breakdown of charges from the landlord. If discrepancies are found, tenants should promptly address them with the landlord to reach a fair resolution.

Tips for Avoiding Problems with CAM Charges

  • CAM Reconciliation for Landlords: To prevent disputes and maintain transparency, landlords should conduct regular CAM reconciliations. This process compares actual expenses incurred to the amounts billed to tenants, ensuring accurate allocation of CAM charges. Closely monitored expenses help landlords to quickly identify and address any discrepancies, which fosters trust and goodwill with their tenants.
  • CAM Audit for Tenants: Tenants should also be proactive in reviewing their CAM charges by conducting periodic audits. This entails carefully examining the lease terms, expense allocations, and billing statements to verify the accuracy of CAM charge. If any inconsistencies are discovered, tenants should promptly discuss them with the landlord to seek a resolution.

In the unfortunate event that disagreements over CAM charges escalate, landlords and tenants can seek legal recourse. It’s essential to understand your rights and responsibilities under the lease agreement and consult with an attorney if necessary.

Hire a professional CAM reconciliation and CAM audit service provider

It is worth considering the help of experts to ensure a seamless and hassle-free experience with CAM charges. PreludeSys has decades of experience in lease management services and stands out as one of the leading CAM reconciliation companies in the US. When you partner with a trusted service provider like PreludeSys, landlords and tenants can easily navigate the complexities of CAM charges, leaving them free to focus on what truly matters—growing and maintaining their businesses. Let the experts handle the intricacies of CAM charges while you reap the benefits of a well-maintained commercial property!

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