Expert: John Smiley - 9/22/2008

Question
John,
I recently bought my first small commercial building and have three office spaces open. I am advertising and have been asked what the "cam" charges were. I have a vague understanding, but not clear. What does cam acutally stand for, and how can I use it to my advantage when writing up a lease? Thanks Randy

Answer
Hi Randy,

CAM stands for "common area maintenance".  It is also known by other phrases such as additional rent, operating costs, and TMI--taxes, maintenance and insurance.

In any triple-net lease, the tenants pay not only basic (or "net") rent, but also the additional rent, which is comprised of costs generally associated with operating the building.  As a tenant representative myself, I like to ensure that my clients are paying costs of operating the building, but not owning it.  For example, I'm careful to ensure that the landlord is not charging costs of leasing (tenant improvements, broker's commissions, etc.), legal costs associated with defending against any action, or accounting costs other than those incurred for the determination and apportioning of operating costs.

May I highly recommend that as a first-time owner you consult with an accountant and a lawyer that can advise you on the best structuring of your rents as well as good quality lease drafting.  Owning a commercial property is, as far as I am concerned, a very good investment (with the usual caveats about markets and rents going down, etc.)  However, it can also be a very risky endeavour, and your lease is your very best protection against any loss.

Good luck!
John Smiley