🏢 Tenant Improvements, CAM Charges, and Personal Guarantees—Explained
If you're leasing commercial space for your business—especially a medical or dental office—you’ll likely encounter three terms that can have major legal and financial consequences:
Tenant Improvements (TIs), Common Area Maintenance (CAM) Charges, and Personal Guarantees.
These terms often hide in the fine print of a lease but can affect everything from your startup costs to your monthly cash flow—and even your personal liability.
Here’s what each one means, why they matter, and how to protect yourself before signing a commercial lease in Arizona.
1. Tenant Improvements (TIs)
Tenant improvements refer to any modifications or build-outs made to the leased space to fit your business needs—think medical exam rooms, dental operatories, or custom reception areas.
What You Need to Know:
Who pays for the work? Landlords may offer a TI allowance, which is a fixed dollar amount per square foot.
What does it cover? TI funds usually cover construction—but may not include furniture, signage, or technology.
Who manages the build-out? Clarify whether the landlord will oversee construction or if you can choose your own contractor.
What happens to unspent funds? Sometimes unused allowance is forfeited or can only be applied to rent under certain conditions.
📌 Tip: Always get the TI agreement in writing with clear scope, deadlines, and cost caps. Negotiate for flexibility—especially for specialized build-outs like medical gas lines or ADA upgrades.
2. CAM Charges (Common Area Maintenance)
CAM charges are additional fees tenants pay to cover their share of operating and maintaining the property’s shared spaces—like lobbies, parking lots, landscaping, and hallways.
CAM Charges Typically Include:
Building insurance and property taxes
Landscaping and janitorial services
Parking lot maintenance
Security systems
Repairs and utilities in shared areas
CAM Red Flags:
Undefined costs – “Landlord’s discretion” often means uncontrolled increases
Capital expenditures – These should be the landlord’s responsibility, not yours
No cap – Without a limit, CAM charges can spike annually without warning
📌 Tip: Ask for a detailed breakdown of CAM charges and try to negotiate a cap on annual increases (e.g., 3–5%). Avoid vague language like “CAM subject to landlord’s reasonable determination.”
3. Personal Guarantees
A personal guarantee means you—the business owner—agree to be personally liable for the lease, even if your business entity (LLC or corporation) signs the contract.
Why It Matters:
If your business fails or can’t pay rent, the landlord can go after your personal assets—home, savings, etc.
Arizona law enforces these guarantees unless specifically waived or negotiated
What to Watch For:
Unlimited guarantees – No cap on your liability
Duration – Does the guarantee last the entire lease or just the initial term?
“Good guy” clauses – These can limit your liability if you vacate the property and leave it in good condition
📌 Tip: Negotiate to limit the guarantee to:
A maximum dollar amount
The first 12–24 months of rent
Or request its removal entirely after strong payment history
🧠 Final Thoughts
TIs, CAM charges, and personal guarantees may seem like “back-page” details—but they can make or break your commercial lease.
Before you sign anything, have an experienced attorney review the lease to help:
Spot excessive CAM language
Ensure TI terms are clearly defined and achievable
Limit or remove personal guarantees wherever possible
Your lease should support your growth—not trap you in a financially risky situation.
Hurley Law Group
Commercial Leasing Counsel for Arizona Healthcare Practices and Small Businesses
📞 308-383-1867
🌐 hurleylawgroup.com
✉️ eric@hurleylawgroup.com