One of the most common landlord and tenant disputes is additional charges agreed to in a lease are the common area expenses (CAM).
In a multi-tenant property, where the landlord maintains the property outside of the leased premises, is known as the common area. When a contract is entered into between a landlord and a tenant there should be a disclosure with the fees attached to the maintenance of the common areas. The customary disclosure is twofold; the current maintenance fees and secondly the fractional percentage of the total costs that the tenant is responsible.
Possible Common Area Inclusions
- Landscape maintenance
- Water & Power
- Yard repairs
- Management fees
- Real estate taxes
- Insurance
- Miscellaneous repairs
- Reserves
- Security
- Paint
- Roof
- Business license fees or any other City charges for permits
Base Year Costs
The lease should provide the year and the fee on which the common area were calculated. Therefore, any increases in the CAM would use the base year to adjust any increased costs.
Recommendations to Avoid Legal Issues
- During the course of the negotiations on the lease, attempt to place a ceiling on any increases in the CAM. It may be difficult to obtain a ceiling on the CAM charge, but be prepared to accept any reasonable percentage.
- When negotiating the lease, have the landlord provide a disclosure on any pending large CAM charges (roof replacement, HVAC, or landscape refurbishment).
- Make sure the lease contains the right to audit the CAM charges. You may have your accountant or your real estate brokerage company review and determine if the fees are consistent with industry standards
- You should always pay the CAM charges on time even if you do not agree with the charges but pay under protest. The worst thing you could do is not pay the charges since you could breach your lease and have other consequences.
- If you are unsure of any of the items mentioned herein, please call your legal counsel to review the lease.
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