In a commercial lease, the “Common Area Maintenance” (or “CAM”) fee is a common example of the “triple net” (NNN) structure. Landlords typically expect payment from tenants for expenses like insurance, taxes, and common area maintenance in NNN leases. Triple net lease (or NNN) is a popular form of a commercial lease because it allows tenants to bear 100% of the responsibility for all repairs and maintenance. CAM is included in this type of lease. The landlord receives full payment for all of the money it spends on the upkeep of the shared spaces. However, NNN leases have a reputation for being difficult and convoluted, and they typically call for extensive negotiations before a definitive agreement is reached. To protect your interests, it is recommended that you bring a lawyer to these discussions. Without them, nevertheless, you should give serious thought to the following before finalizing any leasing agreement.
- Set a base year.
When calculating the first month’s payment, landlords will often factor in a certain amount for CAM fees depending on the previous year’s expenses (Base Year). Increases in CAM costs over the Base Year amount are passed on to tenants at their proportionate share. Tenants typically have the option of making the year of lease signing (rather than the year before) the Base Year. When renegotiating a lease, tenants should push for a new Base Year to be used for CAM costs.
- Lowest Possible Occupancy Rate
It’s unusual for a structure to have no empty rooms. The tenant’s share of CAM is normally determined by the ratio of the tenant’s space to the total amount of rentable space in the building. Therefore, if a property has low occupancy, the tenant may be responsible for a larger share of the CAM costs than it would if occupancy were higher. Tenants should bargain for a minimum proportion of assumed occupancy. A success rate of 85% to 90% is typical. Instead of assuming full
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