Negotiating Common Area Maintenance (CAM) Charges in Commercial Leases: Pitfalls and Best Practices

As a commercial tenant in a shopping center or other property with multiple tenants, you’ll likely come across Common Area Maintenance—or CAM—charges as you look for the ideal spot to set up shop. Common areas benefit everyone who rents in a shared area, and as a result, the upkeep costs are split among all tenants. If you don’t see CAM charges in your lease, they may also be listed as additional rent, operating expenses, or operating costs. It’s important to understand what CAM charges include, how much they’re likely to affect your monthly rent, and how you can negotiate them down to a fair level.

What Are CAM Charges?

CAM charges include a wide range of expenses related to the ownership and upkeep of a property. They may cover repairing furniture and electronics in the shared area, replacing irreparable items, improving the common area, real estate taxes, and other expenses incurred by the landlord. Because CAM charges can cover such a wide range of costs and fees, it’s easy for them to get out of control quickly. A property that is well within your rental budget on paper may run you out of business once the CAM charges start adding up.

Pitfalls of CAM Charges

While CAM charges are generally viewed as a necessary evil when you rent in a shared space, they can strengthen your business when they are handled ethically and appropriately. When a landlord uses them as a way to get extra money out of tenants, you may find yourself struggling to pay rent every month while watching the common area fall into disrepair.

CAM charges come with their own set of pitfalls. First, there are numerous ways to calculate CAM charges. A landlord may charge by dividing up each tenant’s share of square footage, calculating the average CAM expenses per square foot, or by how much each tenant uses the common area. This makes it difficult to predict how much your charges will be each month, since every landlord may approach them differently.

Furthermore, there are few limits on landlords’ use of CAM charges. A landlord who receives little to no pushback on their current set of CAM charges may be emboldened to add more as time passes, enriching them while draining tenants of their money. While this isn’t an issue with scrupulous landlords, you may be affected if your landlord is looking to make a quick 

buck.

How to Negotiate CAM Charges

If you look into a potential property’s CAM charges and you feel discouraged, don’t give up yet. There is often room for negotiation. First, it’s important to know where you stand and what your local rental market looks like. If local commercial rentals are snapped up within hours. Or days of being listed, know that negotiating CAM charges could result in you not even being considered. But if the rental market is slow and you know landlords are losing money to vacant spots, you have a bit of leverage you can use to your benefit.

You may want to ask the landlord about CAM charges and how much your spot pays on average. Ask about factors contributing to those expenses and push for a cap on first-year CAM expenses. This ensures that you are able to budget appropriately and avoid getting in over your head financially.

If you already rent somewhere and you’re attempting to negotiate CAM expenses, it’s still important to know your local market. Are there tenants waiting to take your spot if you don’t renew, or have you been a good enough tenant that you know your landlord would like to keep you? If there’s space for negotiation, there’s no harm in trying. You may wish to ask for a cap on increased CAM charges each year, which allows you to adjust your rent budget annually without worrying about a sudden jump in charges.

As you look over the list of things that your CAM fees cover, do any seem repetitive, unnecessary, or not something that a tenant should cover? If you have some legal understanding, you can negotiate to have certain items excluded from CAM fees. These fees are not meant to let a landlord turn a higher profit; they are meant to cover common area expenses. When you get to this stage of negotiating, it’s often recommended that you connect with a commercial real estate attorney who can negotiate on your behalf.