Common Area Maintenance (CAM) Charges Clause

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A Common Area Maintenance (CAM) Charges Clause is a real-estate lease contract clause commonly found in commercial lease agreements that outlines the tenant's financial responsibility towards the costs associated with the upkeep and maintenance of common areas within a commercial property.

  • Context:
    • It can (often) contain a Definition of CAM Charges Provision which explicitly details what expenses are included as CAM charges, like landscaping, snow removal, janitorial services, security, parking lot maintenance, and utilities for common areas.
    • It can (typically) include a CAM Charges Calculation Method Provision detailing how CAM charges are calculated, usually based on the tenant's pro-rata share of the total leasable space in the property.
    • It can (often) feature a CAM Charges Exclusions Provision that specifies expenses not included in CAM charges, such as capital improvements, repairs resulting from the landlord's negligence, and costs associated with the enforcement of leases or the defense of the landlord's title.
    • It can (typically) require an Annual CAM Charges Reconciliation Provision for adjusting any discrepancies between the estimated CAM charges paid by the tenant throughout the year and the actual expenses incurred.
    • It can (often) provide for a CAM Charges Caps and Floors Provision that sets limits on the annual increase (caps) or minimum amounts (floors) of CAM charges, offering predictability for tenants.
    • It can (typically) grant Audit Rights Provision to tenants, allowing them to verify the accuracy of the CAM expenses charged by the landlord through an independent audit.
    • ...
  • Example(s):
    • A retail lease in a shopping center where tenants contribute to the maintenance of parking lots, walkways, and communal restrooms.
    • An office lease in a multi-tenant building where tenants share the costs for lobby maintenance, elevator operation, and security services.
    • ...
  • Counter-Example(s):
    • A net lease agreement where the tenant is responsible for all property expenses directly, including real estate taxes, building insurance, and maintenance, leaving no need for a CAM charges clause.
    • A residential lease agreement, where maintenance and upkeep of common areas are typically the landlord's responsibility without a separate CAM charge to tenants.
  • See: Commercial Lease Agreement, Pro-rata Share, Annual Reconciliation, Audit Rights, Net Lease, Gross Lease.

References

2024

  • https://www.lawinsider.com/clause/common-area-maintenance
    • NOTE: These phrases encapsulate the obligations, methodologies, and considerations pivotal to CAM arrangements in lease agreements:
      • "Tenant's pro rata share of the cost" - Indicates the basis for calculating each tenant's share of the common area maintenance costs relative to their leased space.
      • "Maintain, clean, or repair the common areas and amenities" - Outlines the landlord's responsibility for ensuring the upkeep and functionality of shared spaces.
      • "Operation, maintenance, and repair of parking areas, snow removal, utilities" - Specifies examples of services covered under CAM expenses, highlighting the range of activities and utilities involved.
      • "Landlord's administrative and overhead costs" - Acknowledges the inclusion of the landlord's costs associated with managing and administering CAM services, often expressed as a percentage of the total CAM expenses.
      • "Estimated on an annual basis" - Refers to estimating CAM expenses annually, with adjustments made based on actual costs incurred.
      • "Annual reconciliation" - The process of adjusting the tenant's CAM charges based on the expenses incurred, ensuring tenants accurately pay for services received.
      • "Exclusions from CAM" - Clarifies that certain costs, such as capital repairs and improvements, are not included in CAM expenses, with specific provisions for depreciation and legal compliance costs.
      • "Maintain the Common Areas in good order, condition, and repair" - States the landlord's obligation to keep common areas functional and aesthetically pleasing.
      • "Subject to reimbursement" Indicates that while the landlord may initially cover CAM expenses, the tenants ultimately reimburse these costs.
      • "Non-exclusive use, in common with" - Describes the tenant's rights to use common areas along with other tenants and possibly the public, underlining the shared nature of these spaces.
    • SAMPLE CLAUSE: “In accordance with the terms of this Lease Agreement, the Tenant agrees to pay for the Tenant's pro rata share of the cost associated with the Common Area Maintenance (CAM). This includes, but is not limited to, the operation, maintenance, and repair of parking areas, snow removal, and utilities for common lighting and signs. The scope of CAM encompasses maintaining, cleaning, or repairing the common areas and amenities of the Premises to ensure they are kept in good order, condition, and repair. The estimated CAM costs shall be determined on an annual basis, reflecting the Landlord's administrative and overhead costs, and shall be subject to an annual reconciliation process based on the actual expenses incurred during the preceding year. This reconciliation process ensures that if the actual CAM expenses exceed the estimated costs, the Tenant will pay their pro rata share of the difference, and conversely, if the actual costs are less, the Landlord will refund the Tenant's excess payment.

      Exclusions from CAM shall include capital repairs and replacements, except where annual depreciation on such capital items, in compliance with legal requirements or undertaken to reduce CAM expenses, is accounted for in the CAM costs. It is agreed that the Landlord, subject to reimbursement by the Tenants, shall maintain the common areas to the benefit of all occupants, ensuring the non-exclusive use of these spaces in common with other tenants and parties. The Tenant's financial contribution to CAM is essential for the upkeep and functionality of shared facilities, contributing to a well-maintained and serviceable working environment for all tenants and visitors to the Premises. ".

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