What Is Included in CAM Expenses? A Complete Landlord Reference
Quick Answer
CAM expenses are the routine costs to operate and maintain the common areas of a commercial property. BOMA guidelines and standard net leases distinguish between permissible operating costs landlords can pass through and excluded capital or ownership expenses they cannot. Ambiguity in these definitions is what drives most landlord-tenant litigation.
The definition of CAM expenses sounds simple until you try to apply it. In practice, what belongs in the recoverable pool and what does not is decided by lease language first, BOMA guidance second, and case law a distant third. Every property manager reconciling a multi-tenant building needs a clear reference for where that line sits.
The Standard Inclusions and Exclusions
Most commercial leases follow a pattern that looks like this, though the specific wording varies considerably from one agreement to the next.
Standard inclusions
- • Utilities for common areas
- • Janitorial and cleaning services
- • Landscaping and snow removal
- • Routine HVAC maintenance
- • Security personnel and systems
- • Third-party property management fees
- • Parking lot maintenance and lighting
Standard exclusions
- • Capital expenditures (roof replacement, new HVAC systems)
- • Landlord executive salaries
- • Leasing commissions and marketing costs
- • Legal fees for other tenant lease negotiations
- • Debt service and mortgage payments
- • Tenant-specific work orders
Sources: Lowndes Law commercial lease guidance and the BOMA Experience Exchange Report on operating expense definitions.
The inclusions are the day-to-day cost of operating shared space. The exclusions are ownership costs, financing costs, or expenses that benefit individual tenants rather than the building as a whole.
Section 1: The Capital Expenditure Exception
Capital expenditures are the most frequently contested category. The general rule is straightforward: replacing a roof or installing a new HVAC system is a capital improvement that extends the useful life of the asset, not an operating expense, and therefore does not belong in the recoverable CAM pool.
There is a recognized exception from IREM operating expense guidance: cost-saving capital improvements may be recoverable if two conditions are met.
The improvement must actually reduce operating costs. LED lighting retrofits that cut electricity consumption and high-efficiency HVAC units that lower maintenance and utility spend are the clearest examples. The cost must also be amortized over the useful life of the improvement, not billed as a lump sum in the year it was installed. Billing $180,000 for a lighting retrofit in a single year is not amortization. Billing $18,000 per year for ten years, with the savings flowing back to the property's operating cost line, is.
Landlords who want to recover these costs must have lease language that explicitly permits it. Without a specific carve-out, the default rule applies and the expense stays out of the pool.
Section 2: The Most-Disputed Line Items
Even when both parties agree on the general categories, specific line items generate disputes at a rate that exceeds everything else. The Cox Castle analysis of common area expense provisions identifies a consistent set of problems that appear again and again.
Duplicate recovery: admin fee and management fee
Some reconciliation statements include both an administrative fee (typically 10-15% of gross expenses) and a third-party property management fee. If the management company charges a fee and the landlord also adds an admin markup on top of it, tenants are paying twice for the same function. Leases typically permit one or the other, not both.
Executive salaries embedded in the management fee
Property management fees are recoverable when charged at market rates for actual services. When above-market fees are used to recover landlord executive compensation, that salary component is an ownership cost, not an operating expense. Auditors catch this by benchmarking the fee percentage against IREM data for comparable properties.
Capital improvements reclassified as repairs
A parking lot resurfacing billed as 'parking lot maintenance' and a roof replacement coded to 'roof repairs' are common reclassifications. The distinction is whether the expenditure restores an asset to its prior condition (repair) or extends its useful life or adds capacity (capital). The dollar amount and the scope of work both matter in making this call.
Tenant-specific work billed to the common pool
HVAC repairs inside a single tenant's suite, electrical work for a specific tenant's buildout, and cleaning services for a tenant's private areas do not belong in the shared CAM pool. These costs should be billed directly to the tenant who benefited. When they flow through the pool instead, every other tenant in the building absorbs a share of a cost that was not theirs.
Source: Cox Castle, "Top 10 Issues in Common Area Expense Provisions."
Section 3: Why Lease Language Is Everything
Ambiguity in the expense definition is not a gray area: it is a litigation trigger. Courts have ruled both ways on contested inclusions depending on whether the lease language was specific or general, and whether the parties' course of dealing supported one interpretation over the other.
Requesting itemized GL detail rather than accepting a reconciliation statement that shows only a total per category is the first thing to do. A statement that says "maintenance and repairs: $142,000" tells you nothing about whether that number includes a capital reclassification. The underlying GL will show each account, each vendor invoice, and each dollar amount that was coded to the pool. That is the document that makes an audit possible.
Maintaining a GL coding guide that defines, at the account level, which accounts are recoverable and which are not is the second. When coding decisions are documented in advance rather than made line by line at reconciliation time, the number of disputable items drops substantially. See the GL coding guide for how to structure account-level definitions that hold up to tenant audit.
For a broader view of the reconciliation process itself, what is CAM reconciliation covers the annual settlement workflow from estimates through year-end. For the specific errors that generate the largest overcharges, common CAM reconciliation errors walks through calculation mistakes, cap violations, and gross-up problems.
If you want to estimate what a systematic pool review might find, the CAM leakage estimator uses building type and square footage to project typical recovery ranges.
Verify Your CAM Pool Line by Line
CAMAudit maps your GL accounts against your lease definitions and BOMA standards to surface recoverable expenses that were excluded and non-recoverable costs that were included.
Verify Your CAM PoolFrequently Asked Questions
What is included in CAM expenses for commercial real estate?
CAM expenses cover the routine costs of operating and maintaining the common areas of a commercial property. Standard inclusions are utilities for common areas, janitorial and cleaning services, landscaping and snow removal, routine HVAC maintenance, security personnel and systems, property management fees, and parking lot maintenance. The exact scope turns on the lease definition, so reviewing that language before any reconciliation is non-negotiable.
Are property taxes included in CAM charges?
Property taxes are sometimes included under a broad operating expense definition, but many leases treat them as a separate recoverable charge outside the CAM pool. Whether taxes flow through CAM or appear as a distinct line item depends on how the lease defines 'operating expenses' versus 'additional rent.' Tenants should read both definitions carefully.
Can a landlord include capital improvements in CAM expenses?
Generally, no. Pure capital expenditures such as roof replacements and new HVAC systems are ownership costs, not operating costs, and most leases exclude them from the recoverable CAM pool. One exception: cost-saving capital improvements, such as LED lighting retrofits or high-efficiency HVAC upgrades, may be recoverable if the lease permits it, provided they are amortized over their useful life rather than billed as a lump sum in the year incurred.
What is typically excluded from CAM in a commercial lease?
Standard exclusions include capital expenditures, landlord executive salaries, leasing commissions, marketing and advertising costs, legal fees from other tenant negotiations, debt service and mortgage payments, and work orders specific to individual tenants. BOMA and Lowndes Law guidance both treat these as ownership or administrative costs that should not be passed through to the tenant pool.
How can tenants verify what is included in their CAM charges?
The most reliable method is requesting the general ledger detail behind the reconciliation statement, not just a summary total. The GL will show every account coded to the CAM pool. Comparing that coding against the lease's expense definitions, and against a GL coding guide that distinguishes recoverable from non-recoverable accounts, is how experienced auditors find overcharges. CAMAudit automates this comparison at the account level.