Understanding Common Area Maintenance Costs in a New Hampshire Commercial Lease

Oftentimes, a new business venture is based on careful calculations about the anticipated expenses; however, there often are hidden costs and the common area maintenance (“CAM”) assessment by a commercial landlord is one of those costs that can increase operating expenses considerably.

            CAM charges relate to the maintenance of the common area of a building, including a mixed use development, apartment building, or condominium complex.  The CAM charges may cover costs associated with the operation of common areas, including cleaning costs and repair.  Utilities that are billed for the entire building may be allocated on a pro rata basis to each tenant.  It typically is a fee that is assessed against each business tenant as part of the monthly lease payment, but it may be charged on a quarterly or annual basis.  It is important for this cost to be factored into the economic analysis of whether a specific commercial property is going to be affordable under a business plan.  Despite the fact that this is presented as a fixed cost by the landlord, there always is the possibility of negotiating the amount of the CAM.

            The amount of CAM that a commercial tenant may expect to pay can vary widely depending on the type of building.  In a high-rise, it might cover the lobby, including doorman and security, the elevators, and the common use hallways.  In a larger development, the CAM charges might include maintenance of parking lots and sidewalks, landscaping, and decorative elements.   When negotiating a lease, it is possible to limit the amount of CAM charges by:

  • Allocating the costs for any repair work to the building owner or management company and limiting the fees that must be paid by the tenant;
  • Negotiating a decrease in the overall management fees for the premises; or
  • Setting a cap on the CAM fees, which may provide an incentive for the landlord to keep costs down.

            There are commercial leases that wrap CAM charges into the monthly lease rate.  This is important because the cost for a commercial space where the CAM charges are separate should be significantly lower than the CAM-included lease rate.

            When scrutinizing a lease agreement and the associate CAM charges, it is important to consider the following:

  • Does the lease shift the burden for capital expenditures from the landlord to the tenant?  When the tenants are responsible, this payment could come as a lump sum demand that seriously impacts cash flow at the time of the charge; 
  • Is there an administrative or management fee included in the CAM?  These charges can add up quickly;
  • Are the utilities billed to the tenant or included in the CAM charges?  It is important to determine what, if any, utilities are included in CAM to ensure that a tenant is not paying too much; and
  • Are there in-suite services that are included as part of CAM? Does the CAM cover the cleaning crew that comes in the evenings, as well as other expenses that relate specifically to the space leased by the tenant?

            There are many different charges that can be included in CAM, leading to far more resources being allocated to the tenancy costs than the business initially calculated.  By retaining attorneys who have extensive experience in the commercial real estate field, it is possible to enter into an agreement understanding all the legal and financial obligations of the arrangement and ensuring that it is in accordance with the established business plan.

The Crisp Law Firm, PLLC Advocates for Its Commercial Clients

            In any commercial enterprise, there are hidden dangers that may trip up even the savviest of businessmen.  If you are contemplating a new business venture, including the lease of commercial space, the knowledgeable and diligent New Hampshire Commercial Real Estate Attorneys at The Crisp Law Firm, PLLC are ready to get to work on your behalf.  To schedule an initial consultation with one of our seasoned Concord Commercial Attorneys, call us at (603) 225-5252 today.