Leasing commercial real estate can feel like diving into a world of financial jargon and detailed agreements. Among the most important components to grasp are Taxes & Insurance (T.I.) and Common Area Maintenance (CAM) fees. These elements can significantly impact your budget, so understanding them is crucial for both tenants and landlords. Let's explore these fees in more detail, breaking down what they mean, how they are calculated, and why they matter.

Taxes and Insurance (T.I.)

Taxes:
Property taxes are a major expense in commercial real estate, levied by local governments based on the assessed value of the property. These taxes fund public services such as schools, roads, and emergency services, which benefit the entire community. In a commercial lease, tenants often pay a share of these property taxes. This share is usually calculated based on the square footage they occupy. For instance, if you lease 10% of a building, you might be responsible for 10% of the property taxes. This arrangement is especially common in Triple Net Leases (NNN), where tenants cover not just the base rent, but also property taxes, insurance, and maintenance costs.

Insurance:
Insurance costs in commercial leases cover the premiums for policies that protect the property against risks like fire, theft, and liability. These costs ensure that the property is safeguarded against potential damages, providing peace of mind for both the landlord and the tenants. Similar to property taxes, insurance costs are often passed on to tenants proportionately. This means that in a Triple Net Lease, you’ll also pay a share of the insurance premiums. This setup benefits the landlord by reducing their financial burden and can be advantageous for tenants as well, ensuring that the property remains well-protected.

Common Area Maintenance (CAM) Fees

What Are CAM Fees?
Common Area Maintenance (CAM) fees cover the costs of maintaining and operating the shared spaces within a commercial property. These areas include, but are not limited to, lobbies, hallways, elevators, restrooms, outdoor lighting, landscaping, and parking lots. CAM fees are essential for keeping these common areas clean, functional, and safe for everyone using the property. They ensure that all tenants contribute to the upkeep of shared spaces, maintaining a high standard of operation and appearance.

Components of CAM Fees (a few examples listed below):
CAM fees are typically well defined in the Lease Agreement and may or may not include the following fees (other fees may apply - review the Lease Agreement carefully):
Maintenance and Repairs: Routine maintenance and necessary repairs to keep common areas in good condition. This can include HVAC systems, plumbing, and electrical systems.
Janitorial Services: Regular cleaning services to keep common areas presentable and hygienic.
Landscaping: Upkeep of outdoor spaces, such as lawns, gardens, and parking lots.
Security: Costs associated with security personnel or systems to ensure the safety of the property and its occupants.
Utilities: Shared utilities like electricity, water, and heating for the common areas and outdoor lighting for parking areas.

Tenants typically pay a proportionate share of CAM fees based on the amount of space they lease. For example, if you occupy 20% of a building’s leasable space, you’d be responsible for 20% of the CAM fees. This proportional sharing helps distribute the costs fairly among all tenants.

Why Understanding These Fees Matters
For tenants, understanding T.I. and CAM fees is essential for effective budgeting and financial planning. These fees can significantly affect the total cost of leasing a commercial space. It’s important to carefully review lease agreements to fully understand your financial obligations. Knowing the details of these costs helps you avoid unexpected expenses and ensures you can plan your finances accurately.

For landlords, clearly outlining T.I. and CAM fees in lease agreements helps maintain transparency and build trust with tenants. It also ensures that the property is well-maintained without placing the entire financial burden on the landlord. This arrangement can make the lease terms more attractive to potential tenants, as they understand exactly what they’re paying for and why.

Final Thoughts
Every year, landlords look at how much it costs to keep their property up and running. They do this to make sure that the monthly fees tenants pay for things like maintenance, insurance, and common area upkeep—often called CAM charges—actually cover all those costs. If it turns out that the fees tenants are paying don't quite cut it, the landlord might ask everyone to pitch in a bit more to make up the difference.

If during this yearly checkup it's found that the expenses exceed $2,000 for the year, the property manager will step in. They'll give tenants the chance to bump up their monthly contributions a little to avoid those big, unexpected adjustments down the line.

Navigating the world of commercial real estate leases can be complex but understanding the basics of T.I. and CAM fees can make a significant difference. These fees ensure that properties are well-maintained and financially sustainable, benefiting both landlords and tenants. By understanding and negotiating these fees, both parties can create a lease agreement that supports their respective needs and goals.

For more detailed information on commercial real estate leases and related costs, visit Lee Property Services or call 864.704.1380.