Commercial leases often appear daunting, especially to new and growing San Diego businesses. After negotiating the rent, business owners often feel they have little choice but to accept the remaining terms if they want to move forward. It is always advisable to consult with a commercial lease lawyer, but the thought of additional costs turn many away from this option. “Understanding Your Lease” is a series of articles designed to highlight important commercial leasing issues. The articles are intended to arm business owners with the ABCs of “commercial leasing”, and are not intended as a substitute for professional negotiation. Most commercial leases are triple net leases. Along with the base rent, tenants are required to pay a pro rata share of the common area maintenance expenses (CAM expenses). The scope of these expenses varies from lease to lease, but is most often inclusive of every imaginable cost. See Understanding Your Lease – Common Area Expenses. In this article we briefly summarize the type of expenses included. It’s important to review your lease and make sure you know what the CAM expenses are.
Common area expenses typically include: repair and maintenance of the property’s common areas; landscaping; exterior painting; parking lot paving, resurfacing, painting and lighting; roofing; repair and maintenance of central plumbing, electrical, sewage and HVAC systems; other repair and maintenance expenses relating to the property’s common areas including renovation and redesign expenses; utility expenses related to the common areas; advertising and promotional expenses incurred by landlords; security systems and on-site personnel; permits, taxes, insurance and legal costs; and management and administrative expenses including the salaries of management personnel. On top of these expenses, tenants are required to pay all expenses directly related to the leased space including utilities, repair and maintenance of electrical, plumbing and HVAC systems, compliance with government regulation such as the American with Disabilities Act and are required to maintain a minimum level of general liability insurance.
Common areas typically include parking lots, landscaping, hallways, elevators and stairwells, lobbies, public restrooms, on-site management offices and other public areas. Ask to see CAM histories to help you get a better picture of what your future expenses will look like, and ask about anticipated renovations. These costs can be significant and you’ll want to know what’s on the horizon. Finally, management and administrative costs can be profit centers for landlords, particularly where both management and administrative costs are sought. Be careful that your landlord isn’t double dipping. Work closely with your attorney to reduce uncertainty.