The budget season is definitely not anyone’s favorite, but the fact is, if you have a lease portfolio, then you cannot sideline budgeting for lease lifecycle and related elements. One of the key elements you will budget for is CAM. Common area maintenance (CAM) charges are the tenant’s share of expenses that they owe the landlord. CAM charges are paid by tenants to reimburse the landlord for expenses incurred by them for –
- Maintaining common spaces such as elevators, lobbies, stairwells, parking, etc.
- Services that benefit all tenants such as snow removal, trash removal, security, etc.
CAM charges are divided among all tenants based on their pro-rata share, which is calculated based on the area leased by the tenant. A tenant with a larger leased area will pay a greater percentage share of CAM expenses than one with a smaller area.
In order to help tenants and landlords plan better and ensure no single party has to bear the load of sudden, unforeseen large expense in the form of CAM charges, landlords resort to budgeting. Budgeting for CAM involves estimating the CAM expenses for the year for the entire property, computing each tenant’s share of expenses based on the estimate and sharing that with them so they can prepare for the expenses and also make payments to the landlord as stipulated in the lease. The CAM expense budget is usually prepared based on the previous year’s actual expenses incurred. At the end of the year, the estimates are verified against the actual expenses incurred by the Landlord and invoices are raised to the tenant for any additional charges that need to be paid. Similarly, in the event of any overpayment, the same is credited back to the tenant. While the process seems fairly simple when you look at it from a single lease’s perspective, it can be complex and time consuming when you have large lease portfolio consisting of hundreds of leases or more. Add multilingual leases to the mix and the CAM budgeting becomes even more challenging.
However, as discussed earlier, this is a annual task that crops up every year around the budget season. So, hiring a full-time lease accounting staff just to meet the increasing resource requirements during the budget season can’t justify the costs associated with it. It makes sense to work with a lease services vendor who can offer additional support to help you tide over budget season-specific resource requirements. This helps you save on costs that you would incur if you hired lease accountants or specialists in-house, on your payroll, full-time. This arrangement also eliminates training, HR-related expenses and save on lease agreement interpretation and translation costs, as all of these are taken care of by the vendor. Plus, you stand to benefit from your lease services vendor’s expertise. Vendors who provide lease services are specialized in what they do and bring their industry knowledge, experience and expertise to your budgeting process.