CAM Fees: A Closer Look at Commercial Leases
Your idea has become an institution. Alright, maybe it is too early to refer to it as an institution, but if you are thinking in the long-term, there is one feature in your lease that you should become familiar with. That would be the CAM fees. CAM stands for common area maintenance. CAM fees include maintenance expenses, insurance expenses and property taxes. It goes without saying that if you are leasing commercial space, you are not a sovereign entity. You do not own the space. More than likely however, there will be aspects you will be mutually benefitting from. Rather than have you overlook these fees and discover them as inconveniences down the line, how about we discuss them here and get your new venture off to a successful start?
Commercial Leasing: A Review
Let us begin with a basic review of commercial leasing so that we may shed light on where CAM fees factor in. There are three types of commercial property you can lease:
- Retail space – You sell directly to customers and pay rent to a landlord. Most leases for this type of space are NET leases where a lower base rent is paid up front, but more can come out-of- pocket when CAM fees are reconciled at the end of the year.
- Office space – You do not sell directly to customers, but instead provide a service that requires an administrative office. With office space, more leases are Gross, meaning that more is paid up front and often, CAM expense is not as much of an issue.
- Industrial space – You do not deal with customers. Product is manufactured and space is required for production of goods. Most leases for this kind of space are Gross.
Once you know the type of commercial space you are leasing, there are three types of rent to consider:
- Base rent – This would be the minimum amount, the cost for renting the space itself.
- Additional rent – This would be insurance costs and property taxes, fairly straightforward amounts, but costs passed onto you by the landlord according to what type of lease you have: Gross, Net or Modified Gross. Modified Gross is a compromise between Gross and Net where, ideally, CAM expenses are factored into monthly rent in such a way that costs are not high up front or an unwelcome surprise down the line.
- Maintenance/Operating Expenses – These expenses are also considered additional rent, but can be more volatile than insurance costs and property taxes. That is why we are considering them separately. Out of all the CAM fees, these are the most complex and crucial to understand. It is not uncommon for landlords to overcharge in this area.
Commercial Leasing: Fees
We have returned to the general knowledge required to lease commercial space. Now, we can zero in on the core concerns when it comes to CAM fees and, in turn, better prepare you for the leap of leasing commercial space. Above, we touched upon the notion that you may end up mutually benefitting from features your business will rely on. These features can include restrooms, parking lots or even security. The need for parking alone more or less guarantees that you will be sharing items you will be held responsible for to some degree. Therefore, you should now realize that CAM fees appear in almost all commercial leases.
Commercial Leasing: Calculation
Calculation of CAM fees can either be fixed costs or variable, depending on what works best for you and your landlord. You simply need to know how the fees are going to be computed, when they are going to be due, and how often they are subject to change. With that said, most fee structures are not the same from lease to lease.
If you have any questions regarding a commercial lease, before executing the lease, contact the Law Office of H. Benjamin Sharlin LLC for a free consultation.
The Law Office of H. Benjamin Sharlin LLC is owned and operated by H. Benjamin Sharlin and serves all of Mercer County, New Jersey and the surrounding areas. Mr. Sharlin is a bilingual Spanish-speaking attorney who vigorously represents the interests of all his clients.
Please be advised that this blog is for informational purposes only, is not legal advice and does not create an attorney-client relationship.
The Law Office of H. Benjamin Sharlin LLC
is owned and operated by H. Benjamin Sharlin and serves all of Mercer County, New Jersey and the surrounding areas. Mr. Sharlin is a bilingual Spanish-speaking attorney who vigorously represents the interests of all his clients.
Call (609) 585-0606 or click the button below to schedule an appointment