January 9, 2020: A landlord or building owner typically estimates a tenant’s CAM fees for the entire year by looking at the previous three to five years of expenses and using any existing contracts to project values. For a majority of the costs, the amount is divided by 12 and charged to the tenants on a monthly basis. An example of a cost that a tenant would not pay may be elevator maintenance for a tenant on the first floor.
At the end of the year, the actual CAM fees are compiled reconciled by the property manager. If total CAM fees amount to more than what was paid by the tenants (each with a pro rata share), the remainder is passed on to the tenants. If the actual CAM amount is less than the amount paid, the landlord returns the difference. Each lease stipulates the timeline that the property manager and owner have to provide the documentation to each tenant. Typically it is within 120 days following the previous year.
Whether a tenant has a single, double, or triple net lease, the tenant is responsible for at least a portion of CAM fees. If tenants have a single net lease, the landlord is required to pay maintenance costs and insurance, but the tenant must pay prorated property taxes. Tenants with a double net lease must pay property taxes and insurance while the landlord pays only maintenance costs. Triple net lease tenants pay property taxes, insurance, and maintenance. Even further, some leases will include language that places a cap on CAM fees.
Some tenants sign gross leases which means they pay a flat fee for all things janitorial, electrical, insurance, property tax, and parking. These leases often mean the tenant pays a higher amount per square foot, but at the same time, it’s easier for them to predict their costs. Gross modified leases allow for flexibility of which common area maintenance fees they are responsible. This could mean that the landlord pays electrical bills, but not janitorial. In the case of Gross or Modified Gross leases, CAM reconciliations are usually not performed.
For specific questions about your leases, common area maintenance fees, and other property management, or commercial real estate, contact Chris Cobb, a Beck Partners Associate at (850) 477-7044.
This post originally appeared on Beck Partners' Blog and is republished with permission. Find out how to syndicate your content with theBrokerList.