In reply to a question I was asked today.
There are several types of commercial leases but, the most popular, are the Gross Lease, Net Lease, and the Modified Gross Lease. Many Realtors refer to the expenses of a Net lease as CAM. Yes, CAM is one of the expenses. But lets remember that there are three net leases. Single, double and triple net leases. the nets refer to the three expenses (Taxes, Insurance, & Maintenance) C.A.M. which ONLY refers to Common Area Maintenance which is one of the expenses, NOT all three.
EXAMPLE
BASE RENT of a 1000 S.F. retail unit is $12 per S.F. per year or $1 per S.F. per mo. = $1000.00 mo
Taxes are $1200 a year ($1.00 a S.F. per month) or $100 per month or can be billed annually
Insurance is $1200 a year ($1.00 a S.F. per month) or $100 per month or can be billed annually
Maintenance is $1200 a year ($1.00 a S.F. per month) or $100 per month or can be billed annually
SO YOUR PRO-RATAS are $3 per SF which gives you a $15 per SF total lease amount per year.
Gross Leases are all inclusive and a Modified Gross Lease passes any overages or increases in the expenses to the tenant. If the tax bill would go up, then the tenant would pay the increase or their pro-rata share of the increase. If the tenant is in a 1000 SF unit of a 10,000 SF building then they would pay 10% of the pro-rated bills or increases
Comments(1)