CAM vs. Operating Expenses vs Capital Expenses: Drawing The Lines

One of the more entertaining, enlightening and lively commercial property conversations going is Howard Kline’s CRE Radio. I’m a fan of nearly anything that kicks off, as this show does, with a disclaimer that “what follows is specifically not legal advice” and warns to “consult your own counsel”.  This is usually a signal that what follows is going to get very interesting, and Howard’s show delivers on the premise.

A recent topic was CAM Charges And Operating Expenses – An Open Forum.  (CAM means common area maintenance charges, provisions in a commercial lease that charge tenants for shared aspects of a property such as building lobbies or parking lots).  Speaking to the issue of lease negotiations from both sides of the table, the discussion tackled the eternal issue of landlords and commercial tenants dividing up the various costs of doing business and maintaining property.  Anybody who ever wondered how maintenance costs and capital improvements can overlap and why will appreciate hearing where the lines get drawn sometimes.  Again, never take anecdotal input like this as legal advice applicable to your own deals, but I dare you to not be interested in the conversation.  It’s not every day you get to listen in as the hairs are split.  When a parking lot is repaved, as opposed to topcoated, are these different?  How might one classify them, as CAM or as capital?  In whose interests might lie such characterization?

Reminder: Nothing you read here constitutes legal advice in any way, shape or form!

Leave a Reply