Is CAM the Same as Triple Net?
Those who are somehow connected with the sale or lease of commercial real estate should understand the difference between CAM and triple net. Or maybe there’s no difference? CAM stands for Common Area Maintenance, while NNN includes three expenses: CAM, property tax, and insurance. So what does it mean? Is CAM the same as Triple Net? You’ll find the answers to these and many other questions in the following article.
Similarities and Differences
So, today we have a question about the terms NNN and CAM. Are they synonymous? Both are closely related to the costs that property owners pass on to tenants. Also, common area maintenance and NNN affect the calculation of real estate profits. In addition, both concepts discussed in this article provide critical metrics by which investors can assess the financial health of a property.
However, the similarities don’t end there. NNN and CAM deal with expenses incurred in commercial real estate. As for the differences, there’s also something to be said. The main one is that CAM doesn’t include insurance or property taxes. NNN has several other names, including triple net. However, it’s far from the same as a double or single net.
Expenses Related to CAM
Common area maintenance is one of the main types of commercial real estate expenses that property owners pay to landlords to cover the operating costs and overhead of maintaining common areas. So what goes into this list? Scheduled maintenance, landscaping, security, and trash removal are worth mentioning here.
Other expenses include property management fees, administrative fees, standard area lighting, delivery areas, irrigation water, driveways, sidewalks, storm drains, and electrical service. CAM expenses include window cleaning, janitorial, sewer, stairwell, and loading dock maintenance. Amounts can vary considerably depending on the property in question.
Expenses Related to NNN
What are the expenses included in the Triple net? First, the common area’s maintenance covers all of the above costs. Also, don’t forget about property taxes and insurance costs. Rent under NNN is often lower when compared to a standard lease. As a tenant, your area of responsibility will include most of the NNN costs.
Along with that, you don’t have to worry about one-time expenses. So roof repair or parking lot paving will be the property owner’s responsibility. It’s also not unreasonable to remind you that the costs will go down or up depending on the commercial property. Thus, offices and retail centers have different lease terms and requirements.
Talk About Risks
If you’re a tenant, you should remember that NNN properties involve many expenses. They don’t count except for one-time costs. As for investors, it’s a different matter. For them, this type of lease has a lot of benefits. So if you’re looking for low-risk properties, this is your option since common area maintenance, insurance, and property taxes are passed on to the tenant. The cost of renting an NNN property is not too high.
It’s because you need to somehow compensate for the high costs of tenants. CAM properties are not subject to insurance and taxes, which means a large amount of potential risk for investors. Thus, many properties with common area maintenance are subject to high rents to cover additional risks. In addition, CAM properties are subject to volatile income due to uncontrollable costs such as tax increases and changes in building insurance.
Tips on How to Handle Complications
Unfortunately, the relationship between landlord and tenant isn’t always smooth, whether NNN or CAM. So it’s never a bad idea to discuss the most common problems and solutions between the two parties to a contract. And let’s start by looking at the situation where the tenant doesn’t pay rent, promises to pay off the debt soon, but is using the premises.
First, the owner must send the tenant a written warning about paying the debt within a reasonable period. Further developments will depend on the behavior and will of the parties. If the tenant pays the debt and the landlord wants to maintain the relationship, the conflict will be over. Otherwise, the owner should move on to the next stage, namely, the lease agreement’s termination, which can occur in the following ways.
? Contract termination at the initiative of the landlord. The parties in the agreement should be agreed upon in advance and contain a reference to the specific circumstances. Here the owner has the right to withdraw unilaterally. This method is most convenient for the landlord since it allows him to vacate the premises and transfer them to another person quickly.
? Contract termination by agreement of the parties. In this case, the lessor must send the counter-party a written offer to terminate the contract in advance. If the tenant refuses or ignores the request, the owner may proceed to a third way after the expiration of the period specified in the proposal.
? Contract termination in court. Before going to court, the owner must comply with the pre-trial dispute resolution procedure. Otherwise, the court will deny the claim. According to the law, an indispensable condition for judicial termination of a rental agreement is a delay in payment more than two consecutive times. However, the parties may establish other grounds for termination in the contract.
Sometimes the tenant refuses to move out of the office or warehouse voluntarily after the termination of the contract. The owner must go to court with a claim to vacate the premises in this case. Once he receives the court’s decision, he can leave the premises and recover damages from the tenant.
In cases where the tenant has not paid and has left the premises, taking all his property, the owner should send the counter-party a written offer to voluntarily repay the debt and terminate the contract.
CAM and triple net are not the same concepts. Although both terms refer to expenses paid by the tenant and many similar functions, they differ. For example, CAM doesn’t include insurance or property taxes. The type of lease you choose depends on your goals and the type of commercial property. In addition, consider that the landlord can apply severe measures if the tenant does not comply with the contract terms.