Push for CAM Exclusions in Key Categories

October 23, 2015
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Especially for tenants who haven’t negotiated many leases, the common area maintenance (CAM) clause may seem like one of the more standard, largely predetermined sections of your lease. After all, it looks like just an itemized list, and the owner of the space you plan to rent may have downplayed its role in your total leasing costs, making it seem as though these are reasonable items for you to pay a portion of as a tenant at the center. In years past, the CAM provision would deal with the cost of maintaining sidewalks, parking lots, and other “common areas.” Over time, these clauses have evolved to cover all of an owner’s retail development operating costs. The result is that, in some cases, CAM costs are incredibly pricey—almost as high as minimum rent.

Your CAM clause obligates you to pay a specified share of certain defined costs of operating the center, but savvy tenants know that such definitions vary widely from lease to lease, and actually should be one of the most heavily negotiated sections. Don’t be afraid to push back and fight for a clause that fairly allocates costs between you and the owner. Instead of automatically settling for the owner’s proposed items list, pick and choose the most important items for your business from the Insider’s CAM exclusions rundown. You probably won’t get everything you ask for, but you can avoid paying for items for which the owner should be solely responsible.

Focus on Crucial Items

A typical shopping center owner will try to define “CAM costs” in your lease as broadly as possible, but many of the items on the owner’s lease form will benefit only the owner, and not the shopping center and its tenants. Try to narrow the list so that you’re not paying for items that fall into these categories, and which really don’t help you:

·         Building management/leasing

·         Building services

·         Capital expenses or improvements

·         Costs relating to other tenants

·         Insurance

·         Miscellaneous

·         Penalties and fines

·         Repairs and replacements

·         Utilities

·         Taxes and interest

And make sure that before your lease’s list of exclusions from CAM, it begins with language such as: “Notwithstanding anything to the contrary elsewhere in the Lease, in determining Tenant’s proportionate share of CAM Costs, the following items shall be excluded.”

For a detailed wish list of more than 60 exclusions tenants should fight for, and negotiation tips for making the owner’s CAM definition work in your favor, see “Narrow Owner’s Proposed Charges in CAM Clause,” available to subscribers here.