In past Lease Intelligence posts, I have addressed the fair handling of operating expenses which are, in most cases are passed through to tenants one way or another. Today we dive into CAM
“pools”.
Paying your fair share of CAM, or common area maintenance, is an easy concept when all tenants have access to and equal use of all common facilities in a project, be it parking, outdoor public areas, or elevators. But what happens when you lease space in a multi-building campus setting, a
large shopping center, or a mixed-use project with some amenities serving only parts of the project? Then the waters can get choppy.
You probably already reasoned – the fair way to handle these situations is to attribute operating expenses only to those parts of the project that benefit from
them. If there is only one building in a campus setting that has an elevator, then elevator maintenance costs should be charged only to that building. If a mixed use project spends money on promotional events to drive traffic to the retail component of the property, the residential component would not benefit from that activity and so would not absorb the cost. Reciprocally, if the residential building has a security guard stationed in the lobby at night, those costs should not
show up on the retail tenants’ expense ledger. Good property management practice mandates that various “pools” of expenses be detailed clearly; as a result, the tenant’s share of different operating expenses will vary depending on how much of the project gets the benefit of certain amenities and services.
A good tenant broker with an understanding of property operations will recognize a situation where expenses might be segregated into different pools and will ask to look at historic billings to make sure things are being handled fairly. With 25 years of property management experience under my belt, I have taught some landlords a
thing or two.
Tenant’s need an experienced advocate on their crew to make sure they don’t sink, even if it is only in a CAM pool.
