Apartments and complexes levy charges on residents under the term maintenance. But there are so many sub-charges under these charges. One of those charges is Common Area Maintenance or CAM charges. These charges are usually confusing. The charges are the amount of money that is paid to the society for utilising the common areas in the building or apartment. The reason there is so much confusion amongst residents is that the term can be used to refer to any area you are renting and they overlap with operating costs. Read on to find out how exactly common area maintenance is calculated.
What is a common area?
Common area refers to the area multiple tenants can access and use to their liking. For eg: Clubhouses, gyms in the complex, sporting complex, etc. If your office is in a common area, the office cubicle by itself is private, but the shared bathrooms, hallways and floor is a common area. Another example could be the water connection that is used by everyone in the building. This comes under CAM as everyone has access to it.
Is common area maintenance expenses the same as operating expenses?
The term operating expenses simply mean the cost of operating the building. These include insurance, property tax, repairs, utilities, and management. Common area maintenance applies to the running shared features. CAMs don’t include property tax and insurance.
Why do you pay CAM?
If living in an apartment or a complex, it is required for residents to pay a CAM as directed in the rental or sales contract. The society charges a set amount every month and uses that amount to pay the apartment’s expenses. The apartments have to foot the additional expenses of the building if they go up and can keep profits if they drop. If on a lease, the rent is separated from the cost of running the building. Since you are responsible for CAMs, then you will have to bear the building’s operating costs. If they increase or decrease you will have to foot the bill accordingly.
Check if your CAM is fixed or variable. The tenants must ensure that the lease or rent agreements contain in writing the type of CAM charges you are to pay. If variable, determine the charges that will fall under it. Some societies increase the CAM charges year on year. It’s suggested that you find out exactly when it will increase and by how much percentage every year.
You must be aware and watch out for any additional charges like ‘Administrative fees’ that can be clubbed in with CAM fees by the society. It’s best to ask them to segregate these charges.
How is CAM determined?
The CAM charges are usually decided between the landlord and the tenant before the lease or rent agreement is signed. The charges can be paid monthly or yearly. In some cases, the CAM charges are decided when major renovation is being carried out in common areas.
The society calculates the common area maintenance charge by adding it to the building’s operating costs, insurance, and property tax. Some societies also add an extra CAM admin fee. To determine the CAM rate you owe, the society calculates the pro-rata share of the apartment or complex. The process generally starts by taking the total usable area of the building and dividing it by the usable space of your apartment or house. If your building is 10,000 usable square feet out of a 200,000 usable square foot building, you have 5% of the building’s usable space. Your pro-rata share is 5% and you will have to pay 5% of the building’s total CAM charges. These charges can’t be determined in advance. For that reason, it’s best to keep aside some money for this at the beginning of each year. At the end of the year, the society compares what they charge you to the actual costs and either send you a check for the difference if you overpaid or sends you a bill if you underpaid. Then, it begins again for the next year.
Yes, it does seem complicated, and negotiating them will take some time, but it’s important to be transparent about it right from the start. The best way to make sure you pay the right CAMs is to enlist the help of a representative when you find your next space and to keep his or her number handy throughout your tenancy.
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