This is my own general perspective on how CAM charges work in California commercial leases, drawn from the agreements I review for business tenants. It is not legal advice and not a definitive statement of the law — every lease defines these terms differently, which is rather the point.
When a landlord quotes you a rent figure on a commercial space, that number is usually not what you will pay. In most retail and office leases in Los Angeles you also pay your share of operating the building — common area maintenance, taxes, and insurance, often bundled as “CAM” or “NNN.” In my experience this is where the gap between the deal a tenant thinks they made and the deal they actually made shows up.
CAM is not a fixed industry-standard figure. It is whatever the lease says it is. Two buildings across the street from each other can define it very differently, and the definition is negotiable.
What usually sits inside CAM
The uncontroversial items are things like landscaping, parking lot upkeep, common area lighting and cleaning, security, and property management fees. Most tenants accept these without much argument, and I generally do too.
The items I question are the ones that quietly shift the landlord’s capital costs onto tenants:
- Capital improvements. A new roof or a replacement HVAC system is an asset the landlord owns and will still own after you leave. My view is that if a capital item is included at all, its cost should be amortized over its useful life so you pay only for the years you are actually in the building.
- Administrative fees stacked on top of management fees. I sometimes see a management fee inside CAM and then a further percentage administrative charge calculated on the total, including the management fee. That is a fee on a fee.
- Costs benefiting other properties. If the landlord owns several buildings, watch for shared overhead allocated across all of them.
- Marketing and promotional funds. Common in retail. Sometimes genuinely worth it, sometimes a line item with no measurable return.
- Legal fees. I would not agree to fund the landlord’s cost of pursuing other tenants, or of disputes with me.
The protections worth asking for
Three come up in nearly every review I do.
A cap on annual increases. A cap of three to five percent per year on controllable CAM is a common request. The word “controllable” matters — landlords will usually carve out taxes, insurance, and utilities, which they genuinely cannot control. A cap turns an unpredictable cost into something you can budget.
An audit right. The right to inspect the landlord’s books and records supporting the CAM reconciliation, within a reasonable window after you receive it. I look for language that avoids a very short deadline to object and that shifts the audit cost to the landlord if the error found exceeds some threshold. Without an audit right you are accepting a number you cannot verify.
A clear definition of your proportionate share. Your share should be your square footage divided by the building’s leasable square footage. Watch for a denominator based on occupied space instead of total space — that quietly means you pay more when the building is empty, which is the landlord’s risk, not yours. Also check whether the stated square footage of your own premises is measured or simply asserted.
Base year and gross-up language
In office leases you will often see a “base year,” where you pay increases over the first year’s expenses. The trap I watch for is a base year calculated while the building is half empty. Expenses look artificially low that year, so every subsequent increase is measured against an unrealistic baseline and your share climbs sharply.
The usual answer is a gross-up provision, which calculates variable expenses as though the building were substantially occupied — commonly ninety-five percent. Gross-up language sounds like it favors the landlord and in some contexts it does, but for a base-year office lease it usually protects the tenant.
What I would do before signing
Ask for the last two or three years of actual CAM reconciliations for the building. A landlord who will not provide them is telling you something. Those statements show you the real trend rather than the estimate in the proposal, and they occasionally surface line items that were never mentioned.
Then compare the all-in number — base rent plus estimated CAM — across the spaces you are considering. A lower base rent with an uncapped, loosely defined CAM structure is frequently the more expensive lease.
If you have a lease or LOI and want the CAM provisions reviewed before signing, call (310) 556-9692. This work is generally handled on an hourly or flat-fee basis, and I will scope it for you first.
Related reading: Personal guarantees in a commercial lease · Commercial lease review and negotiation · Business contracts
As above, these are my observations and opinions rather than legal advice, and reading this does not create an attorney-client relationship.
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