Common Area Maintenance (CAM) Charges: Three Things Florida Landlords Need to Know
Many commercial leases include common area maintenance (CAM) charges. CAM charges are generally billed to commercial tenants on top of their rent obligations. These charges account for the costs related to shared common space on the commercial property. Many different specific costs might be included within a CAM charge. For example, shared utilities, security costs and landscaping fees are all typically part of a CAM charge. These fees are also often one of the most heavily negotiated parts of a commercial lease. It is critical that Florida landlords understand how to properly negotiate the terms of their lease so that their legal rights and interests are always fully protected.
A capital improvement is any change to property that either increases the value of the property or prolongs the life of the property. When a landlord makes a capital improvement to a commercial space, there can be tremendous long-term benefits. Though, it is important to note that these improvements also require significant upfront costs. These costs should be shared by all beneficiaries. For example, if a common area space is improved, the landlord certainly benefits. However, the tenants also reap benefits from that improvement. Therefore, a commercial landlord is justified in passing on some of the costs of the improvement to commercial tenants. This is done through CAM charges. A commercial lease must be properly drafted so landlords can split some of the costs of long-term improvements.
Alterations to Common Area Property
Commercial landlords also need to ensure that their lease protects their right to make standard alterations to common area property. If this issue is not handled with care in the drafting process, landlords could potentially run into disputes with their tenants. This is because tenants might argue that the act of paying their CAM charges gives them some interests in the common area space. Therefore, they contend that the common area property should not be altered without their consent. For example, disputes often arise around parking spaces. Commercial landlords sometimes want to repurpose or temporarily restrict the use of parking spaces, while commercial tenants may want to keep these parking spaces available. Without a proper lease, landlords may lose out on their ability to control their own property.
Caps on Charges
Many commercial tenants will ask for, or demand, caps on their CAM charges. These caps will restrict the year to year price increases. Caps on charges are voluntary and can be negotiated between the contracting parties. Florida landlords need to be sure that they carefully assess their future costs. This will help them ensure that they are not agreeing to overly restrictive caps on CAM charge increases. If a cap is agreed to, commercial landlords are often best served by negotiating caps that allows for increases at a compound rate.
Do You Need Legal Assistance?
At Pike & Lustig, LLP, we have extensive experience representing Florida commercial landlords in disputes with tenants. If you are a Florida landlord and you are involved in a dispute over CAM charges, or any other type of dispute with a commercial tenant, please do not hesitate to call our team today at (561) 291-8298. We represent commercial landlords throughout the West Palm Beach region, including in Fort Lauderdale and Boca Raton.