What Are Common Area Maintenance Charges & How Can I Budget for Them in My Commercial Lease?

CAM Charges Are Essential for Keeping Up With Your Commercial Real Estate in Mid-MO. Learn What They Are & How to Cover Them With the Experts at Lindner Properties

Renting and managing a commercial space in central Missouri comes with an array of different costs, and it’s important to budget ahead of time. Before you even contact a commercial real estate professional, you should get familiar with these fees and understand the reason for paying them. Once you have a better understanding, the next step is building a sound financial strategy for your essential costs. When signing a lease agreement, it often includes common area maintenance charges, which help in preserving the quality of the property. Get the full guide to CAM charges in the Columbia, MO area by following along with our commercial real estate team.

What are CAM charges on a commercial property in mid-Missouri

A CAM, or common area maintenance, charge is a fee tenants are responsible for in addition to the base rent of their property. These costs are used to cover basic maintenance tasks for the building’s common areas. Lobbies, hallways, public restrooms, parking areas, lawns and landscaping, and more are all considered common areas in a commercial space. Common area maintenance charges may be divided among tenants who share the property under different businesses, and having everyone contribute ensures that the building remains clean, safe, and in good condition. Without them, your business could have trouble with basic utilities and customer impressions. Learn more about the services and features covered by CAM expenses in mid-MO.

Commercial Real Estate Features Included in CAM Costs for Mid-Missouri Business Owners 

Utilities to keep your mid-MO property running smoothly

The first and possibly most important feature included in your common area maintenance charges is the utility bill. Examples of utilities include water, electricity, plumbing, air conditioning, gas, and more. Because the consumption of utilities like water and electricity can vary over time, the cost fluctuates as well. The changing mid-Missouri seasons also have an effect, since more energy is required to heat a building during the winter or cool it down over the summer. Before signing a lease agreement in central Missouri, make sure you're clear about the property’s policies on utilities and how you may be charged for things like irrigation or common area HVAC needs. 

Commercial property maintenance & repair costs in mid-Missouri

Another major feature included in common area maintenance charges is the maintenance and repair service you need to keep your property running efficiently. These are often routine services for keeping up with the functionality and appearance of common areas. For the grounds outside, you need a professional landscaper to maintain the grass and plant life or a snow plow to clear the parking lots during wintertime. Indoors, your mid-Missouri commercial property may require scheduled cleaning services, painting, and repairs if something is damaged. With solid maintenance and repair at your side, you can keep your commercial property looking clean and professional for potential customers in mid-MO. 

Administrative expenses for managing a business in the Columbia, MO area

When managing your commercial real estate in mid-Missouri, the administrative expenses cover the costs of managing the building behind the scenes. This includes salaries and benefits for your employees, legal counsel, record-keeping, and more. There are two types of administrative expenses: fixed and semi-variable. Fixed expenses on a commercial property include your rent and taxes, meaning they remain the same rate from month to month. Semi variable expenses, however, are more likely to change based on consumption and use, such as the telephone bill or payroll for employees. Staying on top of your administrative expenses will make it easier to navigate paperwork and compliance issues throughout your commercial property in mid-Missouri.

Commercial real estate insurance in mid-Missouri 

The next and one of the most important common area maintenance charges to look out for is your insurance. Many liabilities and risks can come with owning a commercial space, and having insurance can protect you and your employees in those unfortunate scenarios. In the context of CAM charges, you may be responsible for paying insurance premiums on the property’s common areas. Insurance policies can vary in mid-Missouri based on the industry you work in, the types of jobs your employees carry out, and the location of their business. Carefully review different policies before choosing the best plan for your commercial property in Columbia, MO.

Fees for mid-MO property management 

One of the last expenses included in common area maintenance is property management. These fees are mainly focused on supporting your property manager as they optimize the building. If you’re determining positions like your security personnel, this would be considered a property management fee. This also ensures the property manager, who operates a commercial space in mid-Missouri, is given their due payment. There potentially may also be vacancy fees applied to empty units, or an early termination fee if you don’t stay for the full lease. To learn more about property management fees, discuss your business needs with a veteran in mid-MO commercial real estate.

How to budget your mid-Missouri property’s common area maintenance charges 

Now that you know the main features covered in your CAM charges, your next step is finding the best way to finance them for your mid-MO commercial space. Common area maintenance expenses generally depend on the leased property’s total square footage. The required payments may vary among tenants based on what proportion of the space they share. These details should all be clearly outlined in your commercial lease agreement with a landlord in central Missouri. When you’re budgeting and calculating your common area maintenance charges, multiple options are available to suit different lease situations. The three most common calculation methods are fixed percentage, gross-up provision, and pro rata.

Fixed percentage

Some landlords may prefer to assign the tenants’ payments for their common area maintenance. In this case, CAM charges are determined based on a fixed percentage that every tenant pays consistently during the lease. For example, if your common are maintenance charge was $5 per square foot at the beginning of the term, it will remain the same price when you reach the end of a term. Each individual’s fixed percentage expense contributes to the commercial real estate’s full common area maintenance budget. If every tenant agrees and follows the contract, you can keep your property in central Missouri in the best possible condition.

Gross-up provision

Tenants move in and out of commercial spaces all the time in Columbia, MO and surrounding areas. For a commercial space that doesn't have full occupancy, a gross-up provision may be the ideal plan for common area maintenance charges. When budgeting for a gross-up provision, the landlord assigns the costs as if there are 95% to 100% occupied units. By dividing the charges this way, a mid-Missouri commercial property owner can make sure the common areas receive the attention they need while the current tenants aren’t overwhelmed by their CAM expenses. 

Pro rata share

The last technique for budgeting common area maintenance charges is through the pro rata share method. Since different tenants may vary in how much square footage they rent, the pro rata share method divides the cost based on their proportion to the overall commercial property in mid-MO. If a certain tenant oversees 60% of the square footage, they will pay 60% of the building’s total common area maintenance charge each year. This allows a fair dynamic for tenants who do not divide the commercial property’s square footage equally.

Carefully review your mid-Missouri property’s lease agreement & CAM charges before continuing 

A common area maintenance charge is not just an additional fee in your commercial lease agreement. It ensures costs are proportionate and fair regarding the tenants of a given mid-Missouri property. It also helps the building maintain its durability and value – without the proper maintenance, areas may become outdated or need major repairs from a lack of attention. You should always review your lease contract thoroughly and consult your commercial real estate team in mid-MO before signing. When you get to the section that outlines common area maintenance charges, pay close attention to what is included and how much you will be responsible for paying. 

First, you should know what budgeting method you will be using for the lease. If you are expecting a fixed percentage, but the contract outlines a pro rata share method, you could have unexpected issues with financing. You should also know how often you will need to pay these charges, as well as the procedure for invoicing. Once you fully understand your common area maintenance charges, you can finally start managing your central Missouri business!

What to do when there’s a dispute about CAM charges on your commercial real estate 

Property owners and tenants may run into a dispute about common area maintenance charges in the Columbia, MO area, even after a commercial lease agreement has been drafted and reviewed. A landlord may have issues with a tenant not making payments on time, or a tenant might feel like their CAM charges are unfairly high. Whatever your dispute may be, it’s important to use communication and work towards the best resolution. In addition to checking the lease agreement and being open with your property manager, it could be necessary to work with a CPA (Certified Public Accountant) who can help in negotiating the CAM charges. You may also put your trust in a commercial real estate attorney to settle the dispute.

Don’t Wait to Organize Your Common Area Maintenance Charges & Other Commercial Property Costs. Contact Lindner Properties & Let Our Mid-MO Professionals Guide You!

Paying your base rent is important, but your common area maintenance charges contribute to a better overall property. From your indoor plumbing to exterior paint, the quality of a mid-Missouri commercial space makes all the difference for your employees and potential customers. Start exploring your different CAM options by reaching out to Lindner Properties! We have been serving the Columbia, MO area for more than 45 years, and we want your business to have all the tools it needs to thrive.