Common Area defined
For lease purposes, common area is defined as the areas of a building that are available for the nonexclusive use of all its tenants, such as lobbies, corridors, and parking lots.
Common Area Maintenance (CAM)
Common Area Maintenance (CAM) charges are charges that are paid by the tenant for the upkeep of areas designated for use and benefit for all tenants. CAM charges are common in commercial transactions and may include lobby areas, centralized bathrooms, parking lots and more. Capital Improvements are commonly included within CAM charges when a tenant receives a statement from the landlord.
Why does this matter to tenants?
Tenants are required to pay a pro-rata share or of the common area for the building they are leasing. Let’s say a small office building is 100,000 SF in total size. If a 5,000 SF tenant moves in the space, they would have a pro rata share of 5%, which means that they would be responsible for 5% of the cost of the CAM charges for the property. This is important because if/when CAM charges increase the pro-rata share shows the exposure to the tenant.
How does this affect my cost in a lease?
When CAM charges increase a tenants cost may increase. I say “may” because it depends on how the lease is structured. Be sure to look at our post on NNN vs Gross leases for more info on this. Protecting the tenant from excessive exposure and implementing controls for additional rent cost is critical and how this is done varies by the deal and also by the market. Make no mistake about it, additional rent cost are just as important to watch as the asking rental rates.