Why it is Important to Understand Exactly What CAM Fees Are Listed in Your Commercial Lease
In 1989, I rented industrial space to open a craft consignment and hobby store. The park appeared to be in good condition and the landlord was a friend of the family and cut the rent by a third as a courtesy. This was the first industrial lease I had signed and did not fully appreciate the power of CAM fees. In other words, I signed a binding legal document without a clue as to what I was signing.
I did not know what a Triple Net Lease was, only that I should avoid signing one. I asked the landlord what type of lease I was about to sign and never once did I hear the term "Triple Net." Instead, I was told my lease had CAM and administrative fees. What I did not realize at the time was that the administrative fees included taxes, insurance and a whole host of other very expensive costs.
Only one month into the lease, the park owner began extensive park renovations including redesigning the front units to appear more like retail space. Signs were changed, the building was repainted, and some structural changes were made to the front of the industrial park.
The bill was divided among all tenants, and although I had a very small unit, I was stuck with a $5,000 bill - my portion of the park upgrades even though my unit was on the side and in no way benefited directly from any of the improvements. Other tenants were hit with nearly $20,000 in renovation fees. Had I read the lease more carefully, I would have known enough to at least ask if any upgrades were scheduled in the near future and to see that what I through was a simple lease, was actually a Triple Net Lease in disguise.
