CAM stands for common area maintenance: the cost of running the parts of a commercial property that all tenants share, which the landlord bills back to them on top of base rent. A CAM charge, or CAM fee, is one tenant's share of that cost.
Common areas are the spaces no single tenant leases: parking lots, walkways, lobbies, corridors, shared washrooms, loading areas and landscaped grounds. The Business Development Bank of Canada (BDC) describes CAM as an expense that "all tenants generally share", and gives snow removal, janitorial services, landscaping and property management as examples (BDC, leasing terms).
CAM belongs to net leases, in which the tenant pays operating expenses such as taxes, insurance and maintenance on top of base rent, the fixed rent for the space. The US Office of the Comptroller of the Currency (OCC), which supervises national banks, tells its examiners that retail leases "are commonly written on a net basis with tenants reimbursing the landlord for common area maintenance" (OCC handbook). Under a gross lease, the rent already covers these costs. Our leasing guide compares the types of commercial leases.
A Canadian lease bills the same costs as additional rent, or as part of TMI: taxes, maintenance and insurance.
TICAM stands for taxes, insurance and common area maintenance: the three groups of operating expenses a triple net (NNN) lease bills on top of base rent. A listing that quotes $24.00 plus $9.50 of TICAM asks $33.50 per square foot a year. Ask for the three figures separately, because a cap on CAM leaves taxes and insurance free to rise.
CAM charges are the amounts a tenant pays toward the cost of operating and maintaining a property's shared areas, in proportion to the tenant's share of the building's leasable area. The lease defines which costs enter the pool.
| Usually in the CAM pool | Usually kept out |
|---|---|
| Parking lot sweeping, patching and striping | Roof and structural repairs |
| Landscaping and snow removal | Capital projects, such as a new parking lot |
| Lighting and utilities for shared areas | The landlord's loan payments and income taxes |
| Janitorial service, security and refuse collection | Leasing commissions and other tenants' fit-outs |
| Property management or an administration fee | Costs an insurer or a single tenant repays |
Many leases add an administration fee: a percentage of the pool that pays the landlord for managing it.
Multiply the CAM pool by the tenant's pro rata share: the tenant's leasable area divided by the building's. Take a 60,000 square foot neighbourhood shopping centre and a bakery that leases 3,000 square feet. Every figure in this example is an assumption.
| Step | Calculation | Result |
|---|---|---|
| Pro rata share | 3,000 / 60,000 square feet | 5% |
| Yearly CAM budget | Set by the landlord | $360,000 |
| Bakery's yearly charge | 5% x $360,000 | $18,000 |
| Monthly estimate | $18,000 / 12 | $1,500 |
| Charge per square foot | $18,000 / 3,000 | $6.00 |
The denominator decides the share. Suppose tenants lease 48,000 square feet and the lease divides by leased area. The bakery's share becomes 6.25%, and its charge on the same budget is $22,500. A lease that divides by total leasable area keeps the cost of vacant space with the landlord.
A gross-up restates the costs that vary with occupancy as if the building were full, before the landlord applies each share. Cleaning and utilities fall when units sit empty, while taxes and insurance stay level.
Say the shopping centre is 80% occupied and its variable costs come to $120,000. Grossed up to full occupancy, they become $150,000. The bakery pays 5% of $150,000, or $7,500, which is what it would pay in a full centre.
CAM reconciliation is the yearly settlement in which a landlord compares the estimated CAM a tenant paid with the property's actual costs, then bills the shortfall or credits the excess. Leasing teams also call it a true-up.
The cycle has three steps:
- Budget. Before the year starts, the landlord estimates the pool and bills each tenant its share in monthly instalments.
- Statement. After the year closes, the landlord totals the actual costs and sends each tenant a reconciliation statement.
- Settlement. The tenant pays a shortfall, or the landlord credits an overpayment against future charges.
The shopping centre's budget was $360,000 and its actual costs came to $384,000. The bakery's 5% share is $19,200. It paid $18,000 in estimates, so the statement shows $1,200 due. A new budget at that level lifts the monthly estimate to $1,600.
California's SB 1103 protects small tenants by statute. For leases signed or renewed on or after January 1, 2025, a landlord "shall not charge a qualified commercial tenant a fee to recover building operating costs" unless it meets six conditions (California Civil Code, section 1950.9). One is that the costs "are allocated proportionately per tenant, by square footage, or another method as substantiated through supporting documentation". Another gives the landlord 30 days from a written request to hand over that documentation. A qualified commercial tenant is a microenterprise, a restaurant with fewer than 10 employees or a nonprofit with fewer than 20, once it gives the landlord written notice of its status and attests to its number of employees.
Elsewhere, commercial tenancy laws mostly leave CAM to the lease. Ontario states that its Commercial Tenancies Act "does not set out responsibilities for maintenance" and that landlords and tenants "should list these responsibilities in the lease agreement" (Government of Ontario).
A CAM cap limits how much a tenant's CAM charge can rise from one year to the next, most often on the controllable costs alone. Two caps with the same percentage can produce two bills, because the lease chooses what the percentage is measured against.
Controllable costs are the ones a landlord's choices influence, such as janitorial service, landscaping and management. Leases usually treat taxes, insurance and utility rates as uncontrollable and leave them outside the cap.
- A non-cumulative cap limits each year's charge to a set percentage above the amount billed the year before. Room the landlord leaves unused in a quiet year is gone.
- A cumulative cap raises a ceiling from the first year's figure every year, even when costs stay flat. Unused room carries forward. A compounding version applies the percentage to the prior ceiling.
Take controllable costs of $4.00 per square foot in year 1 and a 5% cap. The costs are assumptions, and the last two columns show what the landlord may bill.
| Year | Actual cost | Non-cumulative cap | Cumulative compounding cap |
|---|---|---|---|
| 1 | $4.00 | $4.00 | $4.00 |
| 2 | $4.08 | $4.08 | $4.08 |
| 3 | $4.16 | $4.16 | $4.16 |
| 4 | $4.66 | $4.37 | $4.63 |
| 5 | $4.94 | $4.59 | $4.86 |
In year 4 the costs jump 12%. The non-cumulative cap holds the bill to 5% above year 3. The cumulative cap stored the unused room of years 2 and 3, so its ceiling sits at $4.63. By year 5 the gap is $0.27 per square foot, or $810 a year for the bakery.
Caps bind when prices climb. The US Bureau of Labor Statistics (BLS) tracks what businesses charge for the services a CAM budget buys. From August 2021 to August 2026, its producer price index for janitorial services rose 26.8% (FRED, janitorial services) and the index for solid waste collection rose 37.8% (FRED, solid waste collection). A 5% cap compounded over those five yearly steps allows 27.6%.
Source: U.S. Bureau of Labor Statistics, Producer Price Index, via FRED (series PCU562111562111, WPU0542, PCU531312531312, PCU561612561612 and PCU561720561720), August 2021 to August 2026; Sphera Credit calculation of the two cap limits.
Between August 2021 and August 2026, security guard services rose 30.7% (FRED, security guards), commercial electricity rose 31.1% (FRED, commercial electric power) and nonresidential property management rose 30.8% (FRED, property managers). These are national price indexes, and one building's costs can run above or below them.
A fixed CAM replaces the yearly reconciliation with a set charge that rises by an agreed step each year. The tenant gains a known cost and gives up the credit in a year when actual costs come in low. Many fixed CAM clauses still pass taxes and insurance through at cost.
Lenders count CAM reimbursements as part of a building's income, and they check that the building's expenses include the costs the tenants reimburse. The test is net operating income: a building's yearly income less its operating expenses, before any loan payment. The OCC's definition says tenant reimbursements "may also be included if the reimbursed expenses are included in the operating expenses" (OCC, net operating income).
CAM reimbursements, also called recoveries, are CAM charges seen from the owner's side. Every dollar of shared cost that the leases leave with the owner lowers net operating income. Take the shopping centre with 48,000 of its 60,000 square feet leased and shares set on total area. The tenants reimburse 80% of the $384,000 pool, and the owner carries the other $76,800. At a 6.5% cap rate, that cost removes about $1,180,000 of value. Our cap rate guide explains what a cap rate is.
A lender reads three things in the file:
- The leases. In multi-tenant industrial buildings, the OCC notes, landlords "are typically responsible for common area maintenance and require reimbursement from the tenant" (OCC, industrial property).
- Management fees. For retail property, the OCC expects management fees underwritten "at 3 to 5 percent of effective gross income, exclusive of reimbursements". Effective gross income is the revenue a property is expected to produce after vacancy and credit losses.
- Arrears. The OCC's loan file checklist asks for "reports of past-due leases, including delinquent expense reimbursements". A tenant that disputes a reconciliation and stops paying appears there.
Our lending guide shows how lenders underwrite a commercial real estate loan from that income.