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How can you reduce your CAM charges without compromising the quality of your space?

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If you lease commercial space, you probably pay common area maintenance (CAM) charges on top of your rent. CAM charges cover the expenses of maintaining and operating the shared areas of the building, such as lobbies, hallways, elevators, parking lots, and landscaping. But do you know how much you are paying and what you are getting for your money? In this article, we will show you how you can reduce your CAM charges without compromising the quality of your space.

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Richard Benswanger

V.P. & Managing Partner at Kent Commercial, Inc.

1 Review your lease

The first step to lower your CAM charges is to review your lease carefully and understand what it says about them. Look for clauses that define the CAM expenses, the calculation method, the frequency of payments, and the audit rights. You may find that some of the expenses are not justified, such as capital improvements, management fees, or taxes. You may also find that the landlord is using a different formula than the one agreed upon, such as grossing up the occupancy rate or including non-contiguous areas. If you spot any errors or discrepancies, you can negotiate with the landlord to correct them or seek legal advice.

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Richard Benswanger

V.P. & Managing Partner at Kent Commercial, Inc.
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It’s important to know that Operating Expense pass through are a very big landlord profit center and each landlord will do as much as possible to keep these costs under their strict supervision and control. There are at least 30+ Operating Expense exclusions that should be included within every lease. You should also make sure that prior to the lease being executed, that the landlord has provided audited or actual copies of the operating expenses for the base year, if this is the basis for these calculations. Finally, as part of the lease, there must be tenant audit rights with specific language that if the audit shows LL overcharge above a certain percentage, then LL shall pay for tenants cost to audit.

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2 Negotiate your terms

The second step to lower your CAM charges is to negotiate your terms with the landlord before you sign or renew your lease. You can try to cap the annual increase of CAM charges, exclude certain items from the CAM expenses, or request a fixed CAM fee instead of a variable one. You can also ask for a tenant improvement allowance (TIA) to cover the costs of renovating or customizing your space, which can reduce your CAM charges in the long run. A TIA is a lump sum that the landlord pays or reimburses you for making improvements to your space. However, keep in mind that a TIA may affect your rent or other lease terms, so weigh the pros and cons carefully.

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Richard Benswanger

V.P. & Managing Partner at Kent Commercial, Inc.
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Tenant improvement allowance will not affect the CAM charges as these charges have to do with care, maintenance, service and repair of the building and building common areas (It’s called CAM = Common Area Maintenance). The TIA will affect the rent depending upon the amount of the allowance, the term of the lease, the credit worthiness of the tenant. The TIA operates in two distinct methods. 1). The tenant is the GC for the improvements and the LL reimburses the tenant according to an agreed upon schedule to include release of liens for the work being paid for that particular payment; or 2). Landlord is the GC improving the premises based upon an agreed to design and specifications.

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3 Monitor your bills

The third step to lower your CAM charges is to monitor your bills regularly and verify that they match your lease terms. You can request a detailed breakdown of the CAM expenses from the landlord and compare them with the previous years. You can also hire a professional auditor to review your bills and identify any overcharges or errors. If you find any discrepancies or issues, you can dispute them with the landlord and ask for a refund or a credit.

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Richard Benswanger

V.P. & Managing Partner at Kent Commercial, Inc.
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Every lease should contain audit rights to provide for the tenant to annually audit LL’s operating expense and RE tax statements.

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4 Reduce your usage

The fourth step to lower your CAM charges is to reduce your usage of the common areas and the utilities. You can implement energy-saving measures, such as installing LED lights, adjusting the thermostat, or using motion sensors. You can also encourage your employees to use public transportation, carpooling, or biking to reduce the parking demand. You can also collaborate with other tenants and the landlord to share the costs of recycling, cleaning, or security services.

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Richard Benswanger

V.P. & Managing Partner at Kent Commercial, Inc.
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Usage of the common areas does not have a large effect on the costs. As these costs will continue to exist no matter how much each tenant uses the common areas. The best and only method to reduce costs is by reducing the amount of electricity being utilized if the lease is full service. There will not be any reduction for transportation costs since the LL is providing parking. If the parking is not totally utilized, this will not affect the overall cost to maintain the parking facility. All of the other items listed in the above statement are under the control of the LL who has a separate, third party contract to perform those services.

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5 Renegotiate your lease

The fifth step to lower your CAM charges is to renegotiate your lease when it is due for renewal or expiration. You can leverage your market research, your tenant history, and your business needs to get a better deal. You can ask for a lower rent, a longer term, a more favorable CAM calculation, or a larger TIA. You can also explore other options, such as subleasing, relocating, or co-working, if they suit your budget and preferences.

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6 Seek expert advice

The sixth step to lower your CAM charges is to seek expert advice from a commercial leasing agent, a lawyer, or an accountant. They can help you understand your lease terms, negotiate with the landlord, review your bills, and plan your future moves. They can also help you avoid common pitfalls, such as signing a lease without reading it, agreeing to unfair CAM charges, or missing deadlines or opportunities.

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Richard Benswanger

V.P. & Managing Partner at Kent Commercial, Inc.
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Any tenant that doesn’t utilize the services of a licensed, experienced commercial leasing agent, a lawyer or their accountant is not being a good steward of the corporate obligations.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How can you reduce your CAM charges without compromising the quality of your space?

1

2

3

4

5

6

7

1 Review your lease

2 Negotiate your terms

3 Monitor your bills

4 Reduce your usage

5 Renegotiate your lease

6 Seek expert advice

7 Here’s what else to consider

Commercial Leasing

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How can you reduce your CAM charges without compromising the quality of your space?

1

2

3

4

5

6

7

1 Review your lease

2 Negotiate your terms

3 Monitor your bills

4 Reduce your usage

5 Renegotiate your lease

6 Seek expert advice

7 Here’s what else to consider

Commercial Leasing

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