What Are Common Area Maintenance Charges (CAM)?

What Are CAM Charges?

Common Area Maintenance (CAM) charges are variable fees paid by tenants in addition to rent to cover the cost of operating, repairing, and maintaining shared spaces in a commercial property.

CAM fees typically cover shared operating costs like landscaping, parking lot maintenance, and janitorial services for lobbies and restrooms. However, they generally exclude tenant-specific costs, such as repairs inside an individual tenant's suite, as well as capital expenditures like roof replacements or major structural repairs.

CAM fees are charged on top of base rent.

Base rent is the fixed amount a tenant pays to occupy a space. CAM charges are separate and variable. They're billed on top of base rent to cover the landlord's costs of maintaining shared spaces.

The difference matters for budgeting. Base rent is predictable, but CAM fees aren't. They're estimated at the start of each year, then reconciled against actual expenses at year end. As a tenant, that means your total occupancy cost can shift year to year depending on what it actually costs to run the property. A surprise CAM reconciliation bill at year-end is one of the most common, and avoidable, cost shocks in commercial leasing.

The distinction matters for building owners as well. In lease structures where CAM is passed through to tenants, the landlord is largely insulated from rising operating costs, which helps protect your net operating income (NOI).

What Is Included and Excluded in CAM Charges?

CAM inclusions vary by property type, but certain costs always fall outside the scope of what landlords can charge.

Understanding what is and isn't included in CAM fees protects tenants from overcharges and helps landlords structure leases that hold up under scrutiny. Costs can vary significantly across property types, so whether you plan to lease industrial property or are considering retail stores for sale, due diligence is crucial.

Typical CAM inclusions by property type

Charges excluded from CAM

Lease terms can vary, but certain costs are broadly understood to fall outside the scope of CAM charges:

• Capital expenditures:Major structural upgrades like roof replacements or HVAC overhauls are generally excluded, though some leases allow amortized CapEx costs to be partially passed through
• Debt service:Mortgage and ground lease payments as well as any financing costs
• Leasing costs:Tenant improvement allowances (TIA), broker commissions, and advertising to attract new tenants
• Landlord overhead:General corporate administrative expenses not directly tied to the specific building's operation
• Costs covered by insurance:Any repairs or losses reimbursed through an insurance claim

How Does Lease Type Affect CAM Charges?

CAM responsibility shifts significantly depending on lease structure.

Understanding how different lease types handle CAM affects your occupancy cost as a tenant and your NOI predictability as an investor.

The table below summarizes how common types of commercial leases handle CAM fees:

Triple net leases

In a triple net lease, tenants cover most expenses. In addition to base rent, they pay their pro rata share of CAM, property taxes, and insurance. Because operating costs flow directly to tenants rather than landlords, NNN lease properties offer a more predictable income stream, but often also come with lower base rents.

Modified gross leases

Modified gross leases split the difference between gross and NNN structures. The tenant pays a base rent that includes operating expenses up to a set base year amount. Any increases above that threshold are passed through to the tenant. This structure is common in office markets and gives both parties a degree of cost predictability while still allowing landlords to recover rising expenses over time.

Gross (full service) leases

In a gross lease, the landlord absorbs all operating costs, including CAM, within a single fixed rent payment. Tenants pay one predictable monthly amount with no separate CAM billing or year-end reconciliation. This simplicity comes at a cost: gross lease base rents are typically higher than NNN rents to account for the landlord's expense exposure.

Double net leases

In a NN lease, tenants pay base rent plus their pro rata share of property taxes and insurance, but CAM remains the landlord's responsibility. This structure is less common than NNN and is typically seen in multi-tenant office buildings and some shopping centers. Tenants carry less expense risk than in a NNN lease, though base rents are generally higher to reflect the landlord's retained CAM obligation.

How Do You Calculate CAM Charges?

CAM fees are calculated based on each tenant's pro rata share of the property's total leasable area.

At the start of each year, the landlord estimates total CAM costs for the property and bills each tenant monthly based on their proportionate share of the building. That share is determined by dividing the tenant's leased square footage by the property's gross leasable area (GLA).

First, calculate each tenant's pro rata share:

Then, find the annual CAM charge:

Finally, calculate the monthly CAM charge for each tenant:

For example, say you chose to buy a shopping center that had $250,000 in annual CAM expenses, and 50,000 square feet of GLA. A tenant leasing 5,000 square feet holds a 10% pro rata share, which would come out to a $25,000 annual CAM charge or $2,083 per month.

How Are CAM Charge Increases Controlled?

Controllable expenses cost landlords directly. Uncontrollable expenses are outside a landlord's direct control.

Controllable expenses include landscaping, janitorial services, property management fees, and administrative costs. Uncontrollable expenses include property taxes, insurance premiums, utilities, and seasonal costs like snow removal. The distinction determines how much negotiating leverage tenants have.

CAM caps, which limit how much charges can increase year over year, typically apply only to controllable expenses. Uncontrollable costs are typically passed through in full, without a ceiling. A tenant negotiating a 3% annual CAM cap should confirm whether that cap applies to all CAM expenses or only the controllable portion, since the latter offers significantly less protection against rising costs.

CAM caps set a ceiling for how much CAM fees can increase annually, while CAM floors set a minimum annual increase.

CAM caps are expressed as a percentage and negotiated into the lease upfront. They can take multiple forms:

• Year-over-year caps apply the percentage to the prior year's actual CAM charges.
• Year-over-base caps apply the percentage to the original base year amount. The cap grows incrementally each year, but always anchored to the starting figure rather than the most recent charges.
• Cumulative caps let the landlord carry forward unused cap capacity. If charges only increased 2% one year but you negotiated a 5% cap, the landlord may be able to recover that unused 3% in a future year.
• Compounded caps apply the percentage increase at a compounded rate year over year, which leads to a higher ceiling over time.

How three common CAM cap structures affect annual charges over five years, starting from a $10,000 base with a 5% cap. Year-over-year caps compound on the prior year's actual charge. Year-over-base caps grow by a fixed dollar amount anchored to the original base. Cumulative caps allow landlords to carry forward unused cap capacity from low-increase years. Cumulative cap scenario assumes 2% actual increases in years one and two, with the landlord recovering banked capacity in year three. Actual results vary by lease terms.

On a ten-year lease starting from a $10,000 base, the spread between a year-over-year cap and a cumulative one can run to tens of thousands of dollars in unbudgeted exposure, most of it invisible until year-end reconciliation.

For tenants, year-over-year caps offer the strongest protection. For landlords, cumulative or compounded structures preserve more flexibility to recover costs over the lease term.

CAM floors work in the opposite direction. They set a minimum annual increase regardless of whether actual expenses rose.

CAM reconciliation ensures fair cost distribution.

Because CAM fees are calculated based on an estimate early in the year, the actual costs rarely match projections perfectly. CAM reconciliation is the process of comparing the estimated charges paid by tenants with the actual expenses incurred by the landlord throughout the year.

After the fiscal year closes, the landlord audits actual expenses against what tenants paid monthly and issues either a credit for overpayment or an additional bill for any shortfall.

Can You Negotiate CAM Charges?

CAM expenses are fixed, but how they're passed through is negotiable.

For tenants, well-negotiated CAM terms mean cost predictability and protection from overcharges. For landlords and investors, clearly structured CAM provisions reduce disputes, support tenant retention, and make NOI more predictable.

• Define inclusions and exclusions explicitly. Don't rely on broad language. Require the lease to name specific cost categories and exclude CapEx, debt service, and landlord overhead by name.
• Negotiate a CAM cap on controllable expenses. CAM caps on controllable expenses are common in well-negotiated leases, and a 3-5% range is common, though the specific percentage varies by market, property type, and negotiating leverage. Confirm whether the cap is year-over-year or year-over-base, and whether it's cumulative.
• Secure audit rights. The right to audit CAM statements annually is a standard tenant protection that keeps landlords accountable and gives investors a mechanism to verify expense accuracy post-acquisition.
• Request a base year or expense stop. In modified gross leases, establishing a base year limits tenant exposure to increases above a known starting point rather than absorbing all operating cost growth.

Understanding what to look for when negotiating CAM charges can also help you identify assets with management problems before you close.

Improper CAM charges are a sign of poor asset management. Look for common red flags during due diligence.

Understanding how to identify and prevent excessive CAM charges helps tenants and investors protect the returns that well-structured CAM provisions are designed to preserve. For investors evaluating an asset, patterns of overcharging or vague CAM definitions can signal tenant retention risk, legal exposure, and compressed returns.

During due diligence, look for:

• Capital costs passed through as CAM. One-time expenditures like roof replacements or major renovations appearing as recurring CAM line items suggest a landlord recouping CapEx vs. OpEx costs they should be absorbing.
• Vague or overly broad lease definitions. Leases that define CAM expansively without clear exclusions give landlords wide latitude to pass through costs that tenants can legitimately dispute, which increases the likelihood of conflict at reconciliation.
• No caps on controllable expenses. An absence of CAM caps, particularly on controllable expenses, increases the risk of tenant pushback, audit requests, and non-renewal at lease expiration.
• Inconsistent reconciliation statements. Poorly documented year-end reconciliations or a history of large true-up bills suggest weak expense tracking and forecasting, which affects both tenant relationships and NOI predictability.

How Do CAM Charges Affect Investment Returns?

CAM charges directly affect NOI and their structure impacts how much risk sits with tenants vs. landlords.

In lease structures where CAM is passed through to tenants, rising operating costs don't compress NOI for the landlord, a core reason why NNN and modified gross leases are attractive to investors.

A property with well-structured CAM provisions helps insulate income from inflation in operating expenses, making operating cash flow more predictable, the asset easier to value, and the cap rate easier to defend. On the other hand, for investors counting on consistent income, a property with poorly structured CAM provisions is a risk that compounds quietly until it shows up in your returns.

The inverse is also true. In gross leases, the landlord absorbs all operating cost increases, which can compress NOI if expenses rise faster than rent escalations.

During the commercial property acquisition process, review existing leases for explicit CAM definitions, caps on controllable expenses, and clear reconciliation processes, all of which factor into how the property is valued during a commercial real estate appraisal.

Frequently Asked Questions

Can I be charged more CAM if my building has vacant units?

Yes. Some leases calculate CAM based on occupied square footage rather than total leasable area. When a building has vacancies, the same operating costs are distributed across fewer tenants, which means each occupied tenant's share increases. When reviewing a lease, confirm whether your pro rata share is calculated against total GLA or occupied space only.

Do tenants have the right to audit CAM charges?

Not automatically. Audit rights must be negotiated into the lease. When secured, audit rights typically allow tenants to review the landlord's CAM expense records within a negotiated window after receiving the annual reconciliation statement. The specific timeframe will vary by lease, so tenants should confirm the specific window during lease negotiations.