A Guide To Common Area Maintenance Fee For Tenants

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When tenants lease commercial spaces for their business, they are required to pay for the repairs and upkeep of the non-exclusive or the common areas. The common areas can be parking lots, lobbies, corridors, staircase, elevators, escalators and even lawns and gardens in the building that is leased. The charges that are incurred in upkeep of these places is called Common Area Maintenance (CAM) Fee.

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Usually, there are several tenants in a commercial building and the common areas require regular maintenance. The CAM charge is an additional amount, on top of the base rent and each of the occupants of the building is required to pay the CAM fee. The fee is decided on pro-rata basis, that is, on proportionate basis of leased area. Hence if the leased area is higher as a percentage of the total leasable area of the building, the CAM charges would also be higher.

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Fixed or Variable

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The CAM fees can be ‘fixed’ or ‘variable’. The tenants must get it in writing in the lease agreements as what kind of CAM charges they will have to pay-whether fixed or variable. If it is variable, then on what factors will the fees vary must also be clarified. They must also get in writing as to by what percentage will the CAM charges be increased from one year to another.

Tenants must be watchful if they are being slapped with ‘Administrative Fees’ in addition with ‘CAM Fees’ by the landlord and what would be the segregation of charges for the two.

The CAM charges are decided between the landlord and the tenant before signing the lease agreement. The CAM charges can be paid on monthly, quarterly or on annual basis. In certain cases, the CAM charges are decided as and when any major renovation work that needs to be carried out in the common areas.

Pitfalls To Avoid

Care must be taken while agreeing to CAM charges by the tenant. Tenants are advised to check the financial documents of the landlord carefully so as to arrive at the correct CAM fees or to weed out anomalies in the CAM charges proposed by the landlord. What constitutes CAM charges is defined broadly by a landlord so as to pass on the operational costs of the commercial building as much as possible to the tenants.

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Unless the lease agreements clearly states what constitutes CAM charges, the tenants are advised before signing the lease agreement to get a clear understanding from the landlord about the following:

1 Salaries of the security guards, support staff in the common areas

2 Insurance costs of the building

3 Repair and renovations of the building, parking lot, any addition to the building at later stage like solar panels on the rooftop, etc

4 Electricity and water charges in the common areas

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Category: Lifestyle