CAM Charges in Commercial Leases in Ontario: What Business Tenants Should Know

Commercial tenants often focus on the base rent when evaluating a lease. However, in many commercial properties the base rent represents only part of the total cost of occupying the premises.

Most commercial leases also require tenants to contribute to Common Area

Maintenance costs, commonly referred to as CAM charges. These costs are typically included as part of the additional rent payable under the lease.

For many business owners, CAM charges can become a significant and sometimes unexpected expense. Understanding how these charges are calculated and allocated is an important part of reviewing any commercial lease.

What Are CAM Charges

Common Area Maintenance charges represent the costs associated with operating and maintaining shared areas of a commercial property.

These areas may include:

• parking lots

• hallways and corridors

• elevators

• landscaping

• building security

• snow removal

• lighting for common areas

The landlord typically collects these costs from tenants as part of the additional rent under the lease.

How CAM Charges Are Allocated

In many commercial leases, tenants are responsible for a proportionate share of the building’s operating costs.

This proportionate share is often calculated based on the square footage of the tenant’s premises compared to the total leasable area of the building.

For example, if a tenant occupies ten percent of the building’s leasable area, the tenant may be responsible for ten percent of the CAM costs.

However, the lease should clearly define how this calculation is performed, as the formula can significantly affect the tenant’s financial obligations.

CAM Charges May Increase Over Time

One issue that concerns many tenants is that CAM charges may fluctuate from year to year.

Operating costs may increase due to factors such as:

• higher property taxes

• rising insurance premiums

• increased maintenance costs

• building renovations

Depending on the terms of the lease, tenants may be required to pay their share of these increased costs.

Because these expenses can vary significantly, tenants should review the lease carefully to understand how CAM costs are calculated and whether there are limits on cost increases.

Expenses That May Be Included in CAM

Commercial leases may include a wide range of expenses within CAM charges.

These may include:

• building maintenance and repairs

• security services

• landscaping and snow removal

• property management fees

• lighting and utilities for common areas

Tenants should carefully review the lease to understand which expenses are included and whether the lease allows the landlord to add additional costs over time.

Why CAM Provisions Should Be Reviewed Carefully

CAM provisions can significantly affect the total cost of occupying commercial premises.

In some cases, tenants may sign a lease focusing primarily on base rent without fully understanding how operating costs will be calculated.

Before signing a lease, business owners may wish to ensure they understand:

• how CAM costs are calculated

• what expenses are included

• whether cost increases are limited

• whether the landlord must provide supporting documentation for operating expenses

Carefully reviewing these provisions can help tenants avoid unexpected costs during the lease term.

Speak With a Lawyer Before Signing a Commercial Lease

Business owners considering a commercial lease should review both base rent and additional rent obligations carefully before signing.

If you are reviewing a commercial lease that includes CAM charges, you may wish to obtain legal advice to understand how these provisions affect your business.

If you are reviewing a commercial lease in Ontario, you can Book a Consultation to discuss your situation and next steps.