National Real Estate Exam (PSI)Leasing and Property ManagementMedium
A landlord owns a multi-unit apartment building and wants to ensure that all common areas, such as hallways, lobbies, and laundry rooms, are regularly cleaned and maintained. Which of the following clauses would typically be included in tenant leases to cover the costs associated with these services?
- ACommon Area Maintenance (CAM) charges
- BPercentage rent clause
- CAd valorem tax clause
- DEscalation clause
Show answer & explanationAnswer & explanation
Correct answer: A. Common Area Maintenance (CAM) charges
Common Area Maintenance (CAM) charges are specifically designed to pass on the costs of maintaining and operating shared spaces in multi-tenant properties to the tenants. This directly addresses the landlord's need to cover cleaning and maintenance of common areas.
Why the other options are wrong
- B. A percentage rent clause relates to rent based on tenant sales, not common area maintenance.
- C. An ad valorem tax clause refers to property taxes, not maintenance of common areas.
- D. An escalation clause allows for rent increases based on various factors, but not specifically common area maintenance costs.
Common Area Maintenance (CAM) Charges
Fees paid by tenants in a multi-tenant property to cover the costs of maintaining and operating the shared spaces, such as hallways, lobbies, landscaping, and parking lots.
- Common in commercial leases (retail, office).
- Often prorated among tenants based on square footage.
- Can include utilities, security, cleaning, and repairs for common areas.
Memory trick: CAM covers the 'Commonly Accessible Maintained' areas.