Commercial Real Estate

Understanding Your Commercial Lease: Operating Expenses, including Common Area Maintenance (CAM) and Other Pass-Through Expenses

To understand the true cost of your commercial lease, you will need to understand operating expense pass through provisions. Expense pass through provisions detail common area maintenance (CAM) expenses, taxes, insurance expenses, and other “pass through” expenses. These provisions are called “pass through provisions,” because the amount the landlord has to pay for these expenses is “passed through” directly to the tenant. The details of operating expense pass through provisions are important to determine the overall value of the deal for both the tenant and landlord. 

While these expenses are always important for a commercial tenant to understand, they are particularly important in lease structures where the tenant takes on the risk of expense inflation, such as NNN and Base Year...

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