The 5 Key Commercial Lease Terms for Restaurants:
Get “On the Same Page” As Your Landlord, Figuratively and Literally
What is CAM?
Finding and leasing commercial space has a different set of rules than for residential rental properties. One golden rule, however, remains true in both cases: thou know and understand the key lease terms and ensure the lease agreement is specific and clear. In this series, we will analyze the key terms of a commercial lease relationship. This is the fourth part of a six-part series, examining the key terms in your commercial lease agreement. Today, we’ll discuss the Common Access Maintenance or CAM.
What is CAM?
Common Access Maintenance, CAM, is a fee for the common, shared areas of a commercial space, such as hallways, public bathrooms, parking, courtyards, roofs, walkways, and so forth. CAM is calculated one of two ways: (1) a flat, fixed amount or (2) a variable amount, depending on a number of factors. CAM fees may be paid on a regular basis, such as monthly, quarterly, or annually, or they may be charged periodically when major repairs to the building or entire business/industrial park become necessary.
Danger, Will Robinson!
Most definitions of CAM are vague and over-simplified, giving the landlord flexibility to pass along fees that the tenant may not anticipate. And, like most things, the parties often overlook this provision of commercial leases until a large CAM fee is forwarded to the tenants. Moreover, in the case of variable CAM fees, the rates can escalate more quickly than monthly rental rates because of its flexible nature. Thus, a lease’s attractive price per square foot may be deceptive when the CAM fees later escalate.
Accordingly, it is crucial for a tenant to reach an understanding with the landlord on the meaning of CAM in their particular lease agreement and to clearly record that understanding in the lease agreement, including how often the fees are to be paid and how much they can be increased each year. Furthermore, I recommend that lease agreements provide for a cap of CAM fees each year to preclude a landlord, eager to make overdue repairs or long-desired renovations, from taking advantage of an unsuspecting tenant.
After the rent payment, CAM is probably the most important consideration in a lease agreement. Please be sure to use caution and diligence in negotiating this lease term and carefully and accurately record it in the lease agreement. If you don’t feel comfortable doing so or if you fear being overmatched by your would-be landlord, then I recommend seeking the aid of attorney.
Next up, we discuss insurance coverage.