Common Area Maintenance (CAM) is a commercial lease charge passed from landlord to tenants covering maintenance, insurance, and operating costs for shared spaces — a variable cost component that can materially increase a tenant's effective occupancy cost above base rent.
CAM charges are the tenant's proportional share of operating expenses for shared building and property areas — parking lots, lobbies, hallways, HVAC systems, landscaping, janitorial services, and property insurance premiums. In retail, industrial, and office leases structured as Modified Gross, Net, Double-Net (NN), or Triple-Net (NNN), the lease agreement specifies which expense categories pass through to tenants as CAM. CAM is typically calculated as the tenant's pro-rata share of total building operating expenses, weighted by the ratio of the tenant's leased square footage to total building gross leasable area (GLA). Example: a 2,000 sq ft tenant in a 20,000 sq ft building has a 10% CAM pro-rata share. If total annual CAM expenses are $150,000, the tenant's CAM charge is $15,000/year ($1,250/month) in addition to base rent. For business loan underwriting, CAM charges are a real cost that must be reflected in cash-flow analysis. The Small Business Administration's SOP 50 10 (sba.gov/document/support-sba-sop-50-10) requires lenders to include occupancy expenses — rent plus CAM — in operating expense calculations for SBA loan underwriting. CAM is often variable and subject to annual reconciliation: the landlord estimates CAM monthly and adjusts (up or down) at year-end based on actual expenses. This reconciliation risk means a tenant's effective occupancy cost can rise significantly above what base rent alone suggests. For commercial real estate lease review, FASB ASC 842 (fasb.org/page/pagecontent?pageId=/standards/accounting-standards-codification.html) requires lessees to identify and separately account for lease and non-lease components — CAM charges that are variable (not fixed) may be excluded from the ROU asset/lease liability calculation under ASC 842.
Yes — CAM is negotiable in commercial leases. Common negotiating points: CAM caps (limiting year-over-year CAM increases to 3–5%), CAM exclusions (removing capital expenditures, management fees, or landlord-specific costs from the CAM pool), and audit rights (the right to audit landlord CAM calculations annually). Strong tenant demand gives more leverage; in weak markets, caps and exclusions are standard.
In a gross lease, the landlord's quoted rent includes all operating expenses (the landlord absorbs CAM risk). In a triple-net (NNN) lease, the tenant pays base rent plus property taxes, building insurance, and CAM separately. NNN base rents are typically lower than gross rents for the same space — the comparison must be made on an all-in basis including estimated NNN charges.
Lenders include all occupancy costs — base rent plus CAM plus any other pass-throughs — in operating expense calculations. Understating occupancy cost by omitting CAM will produce inflated DSCR calculations that don't survive underwriting scrutiny. Provide your full lease including any CAM addenda to your lender or broker at application.