When you rent a space in a commercial building, you are essentially paying for two separate spaces. The first is the usable area, which is the space or office that you are leasing. It includes everything that is available in the space. From bathrooms to the reception areas to balconies. Secondly, you pay for something called the common area.
As the name suggests, common areas are shared and accessible by everyone. Shared spaces typically include foyers, car parks, lifts, toilets, hallways, lobbies, elevators and landscaped areas that are used by multiple tenants. These public and shared spaces need to be managed and maintained well to offer customers, and employees a functional and aesthetic space to do their business.
To make full use of the shared spaces and to maintain them, the tenants are required to pay a fee. This fee is called the Common Area Maintenance Charge. For cleaning, landscaping, security and routine repairs and more services, all the tenants contribute a certain amount. These expenses are generally included in the lease agreements between landlords and tenants, with costs varying based on the tenants’ utilization of the shared spaces.
Utilities: Electricity, water, gas, and sewer services for common areas.
Repairs and Maintenance: Regular upkeep, repairs, and maintenance of common areas, including HVAC systems, roofing, plumbing, and structural elements.
Cleaning and Janitorial Services: Regular cleaning of common areas, including hallways, restrooms, and shared facilities.
Landscaping: Maintenance of lawns, gardens, trees, and outdoor areas.
Security: Costs associated with security services, such as surveillance, patrols, and access control for common areas.
Administrative Expenses: Any other administrative costs directly related to managing and maintaining common areas.
Common Area Maintenance (CAM) expenses come under operating expenses in commercial real estate. Operating expenses are the costs associated with operating and maintaining a commercial property, including common areas, facilities, and services that benefit all tenants. These expenses are typically incurred by the property owner or landlord and are passed on to tenants as part of their lease agreements.
The CAM fees are mentioned in the lease agreements with a breakdown of the costs and the services provided by the management or the landlord. CAM charges are often negotiable during lease negotiations, and tenants ought to carefully review and negotiate CAM provisions to avoid excessive or unfair charges. Property owners typically budget for CAM expenses based on anticipated costs for the upcoming year.
CAM expenses are typically calculated and allocated to tenants based on their proportionate share of the total leasable space within the property. Common methods of calculating CAM charges include:
Maintaining common areas requires significant financial investment and time commitment as they are essential for ensuring the overall appeal, functionality, and safety of a commercial property. These shared spaces play a vital role in creating a positive tenant experience, fostering a sense of community, and enhancing the property's value and attractiveness. Consequently, prioritizing the proper upkeep of common areas is crucial for property owners and landlords to uphold high standards, meet tenant expectations, and effectively manage the property's overall maintenance and operation.
