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CAM Expenses in Commercial Leases: Cumulative versus Non-Cumulative

Lowndes Leasing Lawyers

November 01, 2022

Tim Miedona | Nicole Cuccaro | Lauren Beames

During commercial leasing negotiations, landlords and tenants will often extensively negotiate the terms of a cap on the controllable operating expenses under a lease. Often, however, the issue of whether the cap will be cumulative or non-cumulative is glossed over in the lease language. Based on whether the cap is cumulative or non-cumulative, there could be a significant difference in the actual impact of the cap on expenses.

To take a step back, typical in commercial leases of shopping centers and office buildings, Common Area Maintenance (“CAM”) expenses, also referred to as “operating expenses,” are a separate, additional rent expense for day-to-day operations of the property. These expenses are either controllable, which are expenses a landlord has influence over, or uncontrollable, which are those expenses that are dictated by a third party and thus outside of a landlord’s control. For example, controllable operating expenses may include anything from parking lot maintenance and window washing, to trash removal and landscaping. On the other hand, uncontrollable operating expenses include property taxes and building insurance.

During lease negotiations, tenants often request a “cap,” on the controllable operating expenses from year to year (typically in the range of 3% to 10% annually). For example, if tenant and landlord agree on a 5% annual cap on controllable operating expenses, this means that tenant’s controllable operating expenses the following year will not exceed 105% of the cost from the prior year. These caps on CAM expenses can either be negotiated as cumulative or non-cumulative. While both set a ceiling on the annual increase in controllable operating expenses that can be passed on to a tenant, one is often favored by landlords and the other favored by tenants.

Landlords prefer a cumulative cap on operating expenses because the “cumulative” nature carries on annually such that landlord can recover any unused portion of the cap from prior years. To illustrate, let’s say that landlord and tenant agree to a 5% annual cumulative cap. In year two, the CAM expenses increased by 3%. Therefore, 2% of the cap was unused. In year three, the CAM expenses actually increase by 10%. Tenant’s responsibility in year three would not be capped at the 5%; rather, tenant’s responsibility would be capped at 7%, which includes the unused portion from year two. If the cap in the prior example had been non-cumulative, tenant’s responsibility would have been capped at 5% in year three, regardless of the fact that expenses only increased by 3% of the allowed 5% in year two, therefore preventing landlord from recovering any unused CAM increases from prior lease years. This illustration shows how a cumulative cap on operating expenses provides landlords with more flexibility, and why tenants generally desire non-cumulative caps to avoid unexpected rental increases.

“Operating expense caps, weather they’re cumulative or non-cumulative, continues to be one of the more complex terms Landlord and Tenant face in lease negotiations,” state Jordan Bohannon, Vice President, Avison Young. “However, the concept is important because it addresses the extent of Landlord and Tenant responsibility if there is an increase in controllable operating expense costs for the property that year.” The next time you are negotiating the terms related to operating expenses in a lease, you should carefully read the operating expense provision to make sure that the language matches your intended outcome.

If you have any questions about commercial leasing, please reach out to one of the Lowndes Leasing Lawyers.


Tim Miedona’s practice focuses on commercial leasing, real estate transactions, development and finance, and corporate and securities.

As co-chair of the firm’s Commercial Leasing Group, Tim routinely represents commercial landlords and tenants in the negotiation of their commercial leases and in commercial lease workouts. Illustrative client work includes:

  • Representing a publicly traded multi-billion dollar national real estate investment company in connection with its commercial real estate transactions, including acquisition, development, financing, disposition and leasing of commercial properties;
  • Representing an international restaurant, hospitality and retail company in connection with its acquisition, development, branding and leasing of its sites;
  • Representing numerous regional real estate development companies in connection with the development and leasing of their office, medical, and retail properties; and
  • Representing local businesses in connection with their corporate and real estate matters.

Tim is also active in the firm’s pro bono practice, assisting with legal representation, fundraising activities, day-to-day operations, and promotion for animal rights for A New Beginning Pet Care and Rescue Group.


Nicole Cuccaro concentrates her practice on real estate transactions, real estate development and commercial leasing. She assists a wide range of clients with the acquisition, disposition, leasing and financing of commercial real estate in the retail and hospitality industries.

Before she focusing her practice in the area of real estate law, Nicole handled a variety of commercial and corporate litigation matters and regularly represented lenders and business entities.

Lauren Beames is an attorney in the firm’s Real Estate Department. She focuses her practice in the areas of real estate development, finance and transactions, condominiums, property owners’ associations, commercial leasing, commercial lending and title insurance.

Prior to joining Lowndes as an attorney, Lauren was a summer clerk with the firm. While at law school, she was deputy chief of policy and hours for the Stetson Ambassadors, a member of the Moot Court Board, and a research assistant for the Institute for Biodiversity Law and Policy. She also served as articles editor for the Journal of International Wildlife Law and Policy and as an adjunct professor of environmental regulation at the University of South Florida. Before attending law school, Lauren was a middle school English teacher.

Lauren earned her juris doctorate magna cum laude from Stetson University College of Law, where she graduated magna cum laude and was awarded the Order of the Barristers, the Hearne Family Environmental Law Award, and the Victor O. Wehle Award in Trial Advocacy. She received her bachelor’s degree in English literature and language from Virginia Tech.

An avid lover of the outdoors, Lauren enjoys running, stand-up paddle boarding, and mountain and trail biking when she’s not in the office.

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