Commercial Real Estate Management: Common Area Maintenance (CAM)

September 20, 2011 

 

By: Jay Jackson, Chief Financial Officer

One of the most technical aspects of managing commercial real estate can be the administration of the tenant’s leases and specifically the Common Area Maintenance (CAM) provisions. CAM is a term used in Triple Net (NNN) leases allowing for the property owner to charge backs to the tenants the cost of the three nets, common area maintenance, property taxes, and insurance. Some typical commercial real estate CAM charges are landscaping, janitorial, pest service, and trash removal. Only expenses that benefit all the tenants in the property would be included in CAM. 

Ideally, CAM is charged monthly based on a budget of the estimated expenses for the year. Each tenant is responsible for their pro-rata share of the expense to operate the common areas of the property. After the year is over, the actual expenses are compared to the budget and any shortfall or overage is determined. This reconciliation requires a manager to maintain orderly records throughout the year and correctly identify expenses that are truly CAM. 

In a perfect world, this commercial property management process described above is straightforward. However, the reality is that tenants come and go during the year, leases are negotiated altering the terms of the CAM provisions, and certain expenses fit into a gray area as it pertains to CAM. It is very important for tenants and owners to review their CAM reconciliations closely.  Property owners should choose a commercial property manager that has the experience to properly administer the Common Area Maintenance.