At Newcor Commercial Real Estate, we understand how critical it is for businesses to manage their occupancy costs effectively. One area that often presents challenges is the Common Area Maintenance (CAM) charges. These charges cover shared spaces and services within commercial properties and can sometimes become a financial burden if not handled carefully during lease negotiations. To help you stay ahead, we’ve put together four essential CAM-related tips that can significantly reduce your costs and mitigate risk.
- Eliminate Management Fees from CAM
When negotiating a lease, one of the first things you should look at in CAM charges is whether management fees are included. Property managers often bundle management fees into CAM charges, inflating your overall expenses. By negotiating to have these fees removed from CAM, you can take a major step toward reducing your occupancy costs.
Why it matters:
Management fees can be substantial, and without proper controls, they can escalate year over year. Removing them entirely from CAM shifts the responsibility for these expenses back to the landlord, creating more predictable and manageable costs for tenants.
How to approach it:
Start by reviewing the CAM breakdown in your lease carefully. Bring this to the negotiating table, and request that management fees be billed separately or absorbed by the landlord. It might not always be possible to eliminate them, but this strategy can result in significant savings over the life of your lease.
- Cap Management Fees in CAM
If eliminating management fees isn’t an option, the next best strategy is to negotiate a cap on those fees. Capping management fees ensures that they remain within a reasonable range, preventing unexpected hikes that could strain your budget.
Why it matters:
Uncapped management fees can increase unpredictably, leading to higher-than-expected expenses. By negotiating a cap, you ensure that any increases stay within acceptable limits, giving you more control over your overall CAM charges.
How to approach it:
When discussing lease terms, ask the landlord to include a cap on management fees—either as a fixed dollar amount or as a percentage of total CAM costs. This small but powerful step can give you greater financial predictability throughout the lease term.
- Obtain the Right to Audit CAM Charges
Transparency is key when it comes to CAM charges. Many landlords may not provide detailed breakdowns of these expenses, leaving you unsure about what exactly you're paying for. Negotiating the right to audit CAM charges gives you the ability to review and verify the accuracy of these costs.
Why it matters:
Without the right to audit, tenants have little recourse if CAM charges seem unusually high. Having the ability to audit creates a level of accountability for the landlord and gives you peace of mind that you're not being overcharged.
How to approach it:
Make it a point to include an audit clause in your lease. This clause should grant you the right to review CAM expenses annually or at the end of a specified period. Should you discover discrepancies, you can request adjustments, ensuring you’re only paying for what’s fair and necessary.
- Define What is Included in CAM Very Precisely
One of the most important steps in managing CAM charges is ensuring that the lease clearly defines what costs are included in CAM. Without precise definitions, landlords may add expenses that you didn’t anticipate, leading to higher costs. By clearly outlining what should and shouldn’t be included, you protect yourself from paying for vague or undefined charges.
Why it matters:
Ambiguity in CAM terms can lead to unexpected expenses for services or items you didn’t plan to cover. Precise definitions create clarity and minimize the risk of paying for unnecessary or inflated charges.
How to approach it:
When negotiating your lease, work with your legal and real estate team to carefully outline which costs are permissible under CAM. Whether it’s janitorial services, landscaping, or insurance, having a well-defined list ensures there’s no room for surprises later on. Be specific about what should not be included as well.
Conclusion:
Commercial lease negotiations can be complex, but by taking control of CAM charges, you can significantly reduce your occupancy costs and mitigate financial risks. Whether you're negotiating a new lease or reviewing an existing one, these four tips—eliminating management fees from CAM, capping management fees, obtaining the right to audit CAM charges, and clearly defining CAM inclusions—will help you protect your bottom line.
At Newcor Commercial Real Estate, we specialize in guiding businesses through the intricacies of commercial leases. If you’re looking to gain more leverage in your next negotiation, reach out to our team of experts today. We’re here to ensure you secure a lease that supports your long-term growth and success.
Contact us today to learn more about how we can assist with your lease negotiations and help reduce your occupancy costs.