When renting commercial retail space IN ADDITION to paying pre-negotiated base rents Tenants are also responsible for paying their pro-rata share of triple net charges (NNN). Triple nets are the taxes, insurance, and common area maintenance charges that Landlord’s pass 100% of the costs to Tenants.
The common area maintenance (CAM) charge is one of the net fees charged to Tenants in a commercial retail triple net (NNN) lease mainly consists of the maintenance fees for work done on the retail property’s common area. Each tenant is only responsible for their prorata share which is the percentage of the tenants rented space vs the total square footage of the property.
Common Area Maintenance Charge Definition in Retail Lease Contracts
Below is an example of how you will typically see common area maintenance charges defined in a retail space commercial lease contract.
In addition to the rents and other charges prescribed in this Lease, Tenant shall pay Tenant’s proportionate share to Landlord all of the costs of operation and maintenance of the Common Area (“CAM”) which may be incurred by Landlord in its discretion. CAM shall include, without limitation, all sums expended in connection with: service and maintenance contracts, including, without limitation, windows and general cleaning, removing of snow, ice, debris and surface water, security police (if and to the extent Landlord provides security), electronic intrusion and fire control and telephone alert systems; machinery and equipment used in the operation of the Shopping Center; storm, sanitary and other drainage or detention systems, sprinklers and other fire protection systems, irrigation systems, and electrical, gas, water, telephone and other utility systems; off-site improvements (including off-site detention areas, drainage and detention ponds, landscaping and traffic signals), and the costs incurred by Landlord for maintenance and operation of and/or contributions to such costs maintained by others for any offsite improvements serving the Shopping Center; traffic regulation, directional signs and traffic consultants; permits, program services, and loudspeaker systems; paving, curbs, sidewalks, walkways, roadways, roofs, parking surfaces (including repaving, sealing, striping and patching); lighting facilities; signage; all costs and expenses allocable to any Declaration of Easements, Covenants, Conditions and Restrictions filed against the Shopping Center as amended from time to time (the “ECR”); margin taxes; the cost of compliance with any accessibility statute including, without limitation, the Americans With Disabilities Act and the (State) Accessibility Standards); all costs and expenses of water or other common utilities; uniforms, supplies and materials used in connection with the operation and maintenance of the Shopping Center; advertising, seasonal decorations, whatever management fee Landlord pays to the manager of the Shopping Center, CAM fees, an administrative fee equal to fifteen percent (15%) of CAM, and a reasonable allowance for Landlord’s overhead costs and the cost of any insurance for which Landlord is not reimbursed pursuant to Section 6.2, but specifically excluding all expenses paid or reimbursed pursuant to Article VI. In addition, although the roof(s) of the building(s) in the Shopping Center are not literally part of the Common Area, Landlord and Tenant agree that roof maintenance, repair and replacement shall be included as a common area maintenance item to the extent not specifically allocated to Tenant under this Lease nor to another tenant pursuant to its lease. With regard to capital expenditures (i) the original investment in capital improvements, i.e., upon the initial construction of the Shopping Center, shall not be included and (ii) improvements and replacements, to the extent capitalized on Landlord’s records, shall be included only to the extent of a commercially reasonable depreciation or amortization (including interest accruals commensurate with Landlord’s interest costs). The proportionate share to be paid by Tenant of CAM shall be computed on the ratio that the total floor area (all of which is deemed “leaseable”) of the Demised Premises bears to the total leaseable floor area of all constructed buildings within the Shopping Center (excluding, however, areas owned or maintained by a party or parties other than Landlord); provided that in no event shall Tenant’s monthly payment of CAM be less than the amount specified in Section 1.1(o) above. If this Lease should commence on a date other than the first day of a calendar year or terminate on a date other than the last day of a calendar year, Tenant’s reimbursement obligations under this Section 7.4 shall be prorated based upon Landlord’s expenses for the entire calendar year. Each month during the term of this Lease, at the same time and in the same manner as with the monthly installments of Minimum Guaranteed Rental, Tenant shall pay to Landlord one twelfth (1/12) of the estimated CAM for the current year which Landlord may have given Tenant for the current year or, if the CAM has not been estimated by Landlord, then Tenant shall pay one twelfth (1/12) of the actual CAM for the immediately preceding calendar year. Each CAM payment shall be due and payable at the same time and in the same manner as the payment of Minimum Guaranteed Rental. The amount of Tenant’s proportionate share of the initial CAM shall be as set forth in Article I above. Landlord may at its option make monthly or other periodic changes based upon the estimated annual CAM, payable in advance, but subject to adjustment after the end of the year on the basis of the actual cost for such year, as set forth in Article VI above as to payments of taxes, real estate charges, and insurance.
If you have any questions about common area maintenance charges when leasing retail commercial real estate give us a call and we will help get you up to speed.