Common area maintenance (CAM) charges are a crucial aspect of commercial property leasing. These fees cover the costs associated with maintaining and operating shared spaces, such as lobbies, elevators, parking lots, and common areas in multi-tenant buildings. Landlords typically charge CAM fees on top of base rent, and they can have a significant impact on a tenant’s overall occupancy costs.
However, CAM charges are not fixed and can vary from year to year, based on actual expenses incurred. This is where CAM reconciliation comes in – it is a process that ensures that tenants only pay their fair share of the CAM expenses, based on the actual costs incurred by the landlord. CAM reconciliation is an important tool for maximizing lease portfolio savings because it helps to eliminate overcharging and identify potential cost savings for both landlords and tenants.
Here are some of the ways CAM reconciliation can help maximize lease portfolio savings:
Identifying and correcting overcharges
CAM reconciliation involves comparing the estimated CAM charges that were billed to tenants at the beginning of the lease term with the actual expenses incurred by the landlord. If the actual expenses are less than the estimated charges, the tenant may have been overcharged. CAM reconciliation allows for adjustments to be made, and any overcharges to be refunded to the tenant. By identifying and correcting overcharges, tenants can save money on occupancy costs, which can have a significant impact on their bottom line.
Encouraging landlord accountability
CAM reconciliation encourages landlords to be more transparent about their expenses and to be accountable for their management of shared spaces. Landlords are required to provide tenants with detailed expense reports that show how their CAM fees were spent. This level of transparency can help to reduce the risk of being overcharged by Landlords and can give tenants greater confidence in their leasing arrangements.
Negotiating better lease terms
CAM reconciliation can also help tenants negotiate better lease terms. By reviewing the actual CAM expenses incurred, tenants can identify areas where expenses could be reduced, such as by implementing energy-efficient measures or by negotiating better vendor contracts. This information can then be used to negotiate more favorable lease terms, such as lower CAM fees or longer lease terms.
Improving cash flow
CAM reconciliation can also help improve cash flow for both landlords and tenants. For landlords, CAM reconciliation can help to ensure that expenses are accurately tracked and billed, which can help to reduce the risk of unpaid expenses or uncollected fees. For tenants, CAM reconciliation can help to eliminate unexpected charges and ensure that they only pay for their fair share of expenses, which can help to improve cash flow and reduce the risk of financial surprises.
In conclusion, CAM reconciliation is an important tool for maximizing lease portfolio savings. By identifying and correcting overcharges, encouraging landlord accountability, negotiating better lease terms, and improving cash flow, CAM reconciliation can help both landlords and tenants save money on occupancy costs. If you are a tenant, it is important to review your CAM charges get a CAM reconciliation done by an experienced CAM audit firm or a lease administration service provider.