What is CAM in commercial leasing, and how is it typically reconciled at year-end?

• A. CAM is a tax concession; reconciled through tax credits
• B. CAM charges cover maintenance and common-area expenses; landlords bill estimated CAM, then issue a year-end reconciliation adjusting to actual costs; tenants may owe or receive an adjustment
• C. CAM stands for Capital Amortization Margin; reconciled through depreciation schedules
• D. CAM is the commission on property management; reconciled via fee schedule adjustments

Answer: (B)

Common Area Maintenance charges cover the costs to keep the building’s shared spaces running—lobby, hallways, elevators, landscaping, security, utilities for common areas, and property management. In leases, the landlord typically estimates these costs at the start of the year and bills tenants accordingly, usually based on a rate per square foot or a fixed monthly amount. At year-end, the actual CAM costs are tallied and a reconciliation is issued to adjust to the real expenses. If actual costs exceed the estimates, tenants owe the difference; if costs are lower, tenants receive a credit or refund. This true-up ensures tenants pay their fair share of actual common-area expenses. CAM is not a tax concession, nor a capital amortization concept, nor a management commission, so the reconciliation described aligns with how CAM is typically handled.