How do CAM charges work?
The landlord groups recoverable expenses into one or more pools, for example common areas, the building and the parking structure. Each tenant's lease sets its share of each pool, usually its leased area divided by the pool's total area, plus any caps, exclusions, base year or gross-up rules.
During the year tenants pay estimates based on the budget. After year-end the landlord compares actual recoverable costs with the estimates paid and issues a reconciliation: an extra bill if the tenant underpaid, or a credit if it overpaid.
See also: CAM reconciliation and Commercial lease administration.
What does a CAM reconciliation look like?
Example (illustrative figures). Recoverable CAM for a retail centre is $500,000. A tenant occupying 4,000 of 80,000 sq ft has a 5% share, or $25,000. It paid estimates of $2,000 a month ($24,000), so the year-end reconciliation bills $1,000.
If the lease capped controllable CAM increases at 5% a year and the cap applied, the bill would be limited to the capped amount.
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