What does one tenant actually owe in CAM?

In most commercial leases, tenants pay monthly estimates of their share of common area maintenance (CAM) costs during the year. After the year ends, the landlord compares each tenant's share of the actual costs with the estimates they paid. If the share is higher, the tenant owes the difference; if it is lower, the tenant is due a refund or credit. That year-end true-up is the CAM reconciliation.

Usually by dividing the tenant's rentable square footage by the property's total rentable square footage: a 3,000 sq ft space in a 45,000 sq ft center has a 6.67% share. Leases differ on the denominator. Some divide by leased or occupied area instead of total rentable area, which raises every tenant's share when the property isn't full, and some leave out anchor tenants that pay their own costs. Use the exact definition in the lease.

A cap limits how much a tenant's CAM can grow from one year to the next, usually by a stated percentage such as 3% to 5%. Most caps apply only to controllable expenses like landscaping, janitorial, and repairs; taxes, insurance, utilities, and snow removal are commonly carved out and pass through in full. This calculator applies a simple year-over-year cap: this year's share can't exceed the tenant's actual CAM last year times (1 + the cap percentage). It caps the whole share you enter, so if the lease caps only controllable expenses, run those costs separately.

Leases and guides use these labels inconsistently, so go by how the lease defines the cap rather than the name. Caps come in two basic structures. In one, the cap grows from a fixed starting amount every year whether or not costs actually rose, so unused room carries forward and a cheap year can be followed by a bigger catch-up. In the other, each year's increase is measured against the prior year's actual costs, so a cheap year lowers the base for every year after it. This calculator uses the second, simpler structure. If your lease works the other way, enter last year's capped limit instead of last year's actual charge.

Common exclusions include capital expenditures such as a roof or parking lot replacement (or all but an amortized portion each year), leasing commissions and tenant-improvement costs, the landlord's financing costs and income taxes, costs reimbursed by insurance or by another tenant, and costs caused by the landlord's own negligence. Many leases also limit the management or administrative fee to a stated percentage. Remove excluded items before entering the property's total CAM.

A gross-up clause adjusts variable expenses, such as janitorial or common-area utilities, to what they would have been at a stated occupancy (often 95% or 100%). It keeps tenants in a partly vacant building paying a consistent share and lets the landlord recover costs that rise with occupancy. This calculator doesn't gross up. If the lease has a gross-up clause, adjust the variable expenses first and enter the adjusted total.

In a base-year lease, common in office buildings, the tenant pays its share only of the increase in expenses above a base year, not its full share. An expense stop works the same way with a fixed dollar amount instead of a year. This calculator assumes a net lease where the tenant pays its full pro-rata share, so for a base-year or expense-stop lease, subtract the tenant's share of the base amount from the result.

Many leases require the landlord to deliver the annual statement within a set period after the year ends, commonly 90 to 180 days, and give tenants a window to review or audit the records. Under some leases a late statement can limit what you're able to collect, so check yours. If a tenant disputes the statement, pin down exactly what is being questioned, check the lease's audit-rights language, and answer with the invoices, the square footage, and the calculation behind that specific item.