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Hidden CAMs in a commercial lease

On Behalf of | Jul 3, 2018 | Commercial Real Estate |

Regardless of whether retail properties here in Orange County are at a premium, prospective tenants still want to find the best deal possible. No one should sign a commercial lease if the terms price a tenant out of the space. Everyone involved wants to make a profit, so a balance needs to be struck between what the property owner needs and what the tenant needs.

One area of the lease where negotiations often occur is common area maintenance costs such as janitorial services, trash removal and pest control, among other things. Property owners and tenants ordinarily share these costs, but there could be some question as to whether a tenant should be sharing certain costs with the owner. For instance, should a tenant share the cost of improvements to the entire property?

Ordinarily, the cost of improvements to the entire facility belongs to the property owner. However, if the tenant would also benefit from an improvement, the property owner may want to pass a portion of the cost on to the tenant. Repairs that benefit the entire property may also be passed on to tenants as well if those repairs benefit everyone and not just the property owner.

Discerning whether certain items should be included as CAMs in a commercial lease is not always clear. A prospective tenant here in Orange County may want to take the time to research whether a particular item provides benefit to everyone or only to the property owner. It may be possible to negotiate a need for the property owner to receive a tenant’s consent prior to making discretionary improvements, but the cost of necessary improvements may need to be borne by everyone.