Understanding Commercial Real Estate Management - Common Maintenance Area And Associated Charges

What is Common Maintenance Area?

The common area in a commercial property premise refers to the set of all those physical spaces which are accessible to all the tenants of the property, the landlord and also the invitees of the landlord and any of the tenants. It generally includes the lobbies, corridors, staircase, parking lots, washrooms, elevators etc.

Who pays for it?

Every tenant within the premise of the commercial property owns the common maintenance area equally. Commercial real estate management usually builds an inclusive management structure which charges each tenant for the maintenance and development of the common area. The structure also ensures that the risk of any loss or damage of the common area is equally shared by all.

How do you pay for it?

Here are five things you need to know in order to understand the process of CAM payment

1. Common maintenance area charges form a part of the total charges levied upon a tenant in accordance with the Triple Net Lease. A commercial property for lease is bounded by a payment structure in which the tenant pays the proportionate share of all common charges along with the basic rent. This is termed as the Triple Net Lease, which includes Property Tax, Insurance and Maintenance Charge for the Common Area.

1. 2. The CAM charges are determined during the signing of the lease documents between the landlord and the tenants. The landlord tries to include most of the operational costs into the CAM charges, whereas the tenants try to turn the direction of negotiation otherwise. This difference gave rise to the classification of CAM charges—the controllable and uncontrollable charges.

3. The uncontrollable charges include the security expenses and the costs of basic utilities. The remaining charges, like lighting, landscaping etc., termed as controllable are subject to the negotiation during the preparation of the lease document.

1. 4. In case of a commercial property with multiple tenants, the property owner tries to standardize the charges among all the tenants. The CAM is divided among the tenants in proportion to the tenant’s rented area to the total rent-able area in the property.
2. 5. The common maintenance area charges are subject to rise every year. In order to protect the tenant from an exceptional rise in charges, there is a percentage cap on the rise which limits the rise considerably. However, the value of the cap is also determined through negotiation during the preparation of the lease, wherein the landlord has a significant say.

Commercial real estate services and the CAM

Commercial real estate services manage the common maintenance area as well its charges on behalf of a property owner. They also oversee the auditing and reporting of the common maintenance charges, and avoid any confusion which might arise between the landlord and the tenant over CAM charges.

I am John Daniel, A US based Real Estate Professional and Blogger. With experience in real estate of more than 10 years, the above mentioned article is solely based on my experiences with madison management .