CAM charges also know as Common Area Maintenance charges are charges passed on from the Landlord to the tenant for maintaining the common area of the property. For example; snow removal, HVAC, cleaning, repairs.
It is common for a commercial lease to have specific language regarding which items can and can’t be included in CAM charges. It is also common for the lease to specify that the charges will be paid monthly at an estimated amount and then reconciled at the end of the year.
Usually the landlord has a specified period of time in which they can submit their reconciliation, which includes a break down of all the CAM charges for the year, and how much the tenant’s portion of it will be. If the landlord’s costs were higher than estimated, maybe because there was a lot of snow and the plowing and salting charges were much higher, the tenant has to pay the difference to the landlord. At the same time, if they charges were lower, the landlord gives the difference to the tenant.
Depending on the language in the lease, if the charges continue to be much different year after year, the tenant or landlord can propose that the monthly estimated amount be raised or lowered so that they don’t get hit with a large charge all at once every year.
If you are a tenant, it is important to review the CAM charges reconciliation to make sure that all the charges are what is allowable per the lease. Also, make sure the math is correct and that you are only being charged for your pro rata share based on the square footage that you have in the building.
If you are a landlord, make sure that you get your reconciliations to your tenants within the specified amount of time or you may lose out on collecting the funds owed to you.
CAM language in a lease can be very difficult to interpret, even for seasoned real estate professionals. It is best to consult a lawyer or some one with a real estate license prior to signing a lease.