Four tips are provided for negotiating common area maintenance (CAM) fees in commercial leases: 1) Confirm accurate measurements of leased space since CAM fees are based on percentage of space occupied; 2) Expect unexpected maintenance costs and ensure flexible payment if using percentage of annual costs; 3) Negotiate exclusion of non-maintenance fees like management fees from CAM structure; 4) Negotiate caps on annual increases to CAM fees to control future business expenses.

1. Four Tips for Negotiating
Maintenance Fees

2. Common area maintenance (CAM) fees in retail
leases have long been a stumbling block when
negotiating a commercial lease.
Understanding CAM fees and
their impact on a lease
agreement can be an
eye-opener. The reason is
that they’re quite complicated.
When you lease commercial space,
you pay for more than just the actual
square footage you will occupy. In many
commercial leases, in particular, in retail and
industrial space leases, they are often referred to as
CAM fees.

3. In nonindustrial spaces, you may hear this
expense referred to as “load factor,” which
includes CAM fees. In most shopping and office
complexes, the tenant is expected to pay for the
use of walkways, parking lots, lighting and climate
control. However, an important part of the fair
cost of any commercial space is the maintenance
and repair required for the duration of the lease.
Owners of smaller strip malls will often attempt
to incorporate a management fee into the CAM
fee in the commercial lease.

4. Following are four tips to help in negotiating
CAM fees with a prospective landlord:

5. Confirm Measurements:
Since CAM fees are calculated based on the
percentage of space the business occupies, it is
important to have accurate measurements. The
larger the percentage of space your business
occupies, the greater the fee. Accurate
measurements will ensure that you are not
overpaying for common area maintenance.

6. Expect the Unexpected:
Homeowners have to plan ahead for unexpected
maintenance and so should business owners. Many
landlords use a flat fee for the calculation of CAM
rates, but some still use a percentage of annual
maintenance costs to calculate the fee.
If your lease is calculated
using annual maintenance
fees, ensure that the lease
allows for flexible payment
privileges so those payments
do not negatively impact your
day-to-day business operations.

7. Negotiate the Exclusion of Non-
maintenance Fees Whenever
Possible:
As a tenant, you should ensure that you are only
being charged maintenance-related fees. Some
property owners will include a management fee
within the CAM structure in addition to
maintenance costs. As a prospective tenant you
can avoid additional costs by closely examining
what is hidden in the CAM fee.

8. Negotiate Caps on Annual Increases:
By capping the amount the landlord can raise
the fee, you protect yourself against exorbitant
repair costs and unexpected expenses. This
provides you with a certainty about one aspect
of future business expenses. CAM fees may be
paid monthly, quarterly or annually or even
charged from time to time as major repairs to
the building are required. CAM fees can escalate
at a different rate than the monthly lease rate.

9. Randy Bett
www.BetterGroupRealEstate.ca