Common Area Maintenance or CAM reconciliation is a part of the lease administration process that is critical for tenants because it ensures that they are only paying their fair share of CAM fees. This process compares the estimated CAM fees that tenants paid throughout the year to the actual expenses incurred by the landlord or property manager. At the beginning of the year, landlords or property managers will estimate the CAM fees for the upcoming year based on the expected expenses for maintaining and operating common areas. Tenants will make payments towards the estimated CAM fees throughout the year. At the end of the year, the actual expenses incurred by the landlord or property manager will be compared to the estimated CAM fees paid by tenants. The difference between the estimated and actual costs is then reconciled, and tenants are either credited or debited the difference. If the estimated fees were higher than the actual expenses, tenants will receive a credit, which can be applied to future CAM payments. If the actual expenses were higher than the estimated fees, tenants will be debited the difference, and they will be required to pay the additional amount.
Here are some key to-dos for tenants when it comes to CAM reconciliation:
- Understand your lease agreement: Before signing a lease, it’s important to review the CAM clause carefully to understand how the CAM charges are calculated. Having a clear understanding of the CAM charges computation is the first step in ensuring that you are not overpaying your landlord or property manager.
- Keep track of payments: It’s crucial to keep track of all payments made towards CAM fees throughout the year. This helps ensure you don’t miss any critical deadlines that can cause a penalty to be imposed upon you. Also, keeping track of the payments made ensures that you have all the proof of payment (receipts) handy when it is time to verify your actual payments against the ones indicated in your landlord or property manager’s CAM statement.
- Review the reconciliation statement: Naturally, as a tenant, you should review the CAM reconciliation statement shared with you by your landlord or property manager to ensure that you are being charged for only what you owe and not more.
Now let’s dive into the benefits of CAM reconciliation for tenants:
Cost savings: CAM reconciliation ensures that tenants only pay their fair share of CAM fees. If the estimated fees were higher than the actual expenses, and the tenants paid the estimated CAM charges, the excess amount paid by the tenants will be refunded to them by the landlord or property managers.
Transparency: The reconciliation process provides transparency into how CAM fees are calculated and how they are being used to maintain and operate common areas in a property. This can help tenants to understand the value they are receiving for their CAM fees.
Accuracy: CAM reconciliation ensures that the charges are accurate, which can help to prevent disputes between tenants and landlords or property managers.
In conclusion, CAM reconciliation is an essential process for tenants to understand. By understanding how CAM fees are calculated and reconciled, tenants can ensure that they are only paying their fair share of expenses related to common areas in a property. By keeping track of payments, reviewing the reconciliation statement, and asking questions when needed, tenants can feel confident that they are being charged accurately and fairly.
Are you a retail tenant?
You may be paying your Landlord way more than what you owe!
RE BackOffice helps retail tenants save hundreds of thousands of dollars every year through accurate CAM
audit and reconciliation services.
As a part of our CAM Audit services, we offer–
- CAM charges reconciliation
- Insurance charges reconciliation
- Invoice processing and audits
- Real Estate Taxes reconciliation
- Follow-ups with landlords to correct overcharging
Rebolease.com, powered by RE BackOffice, Inc., is a premier provider of lease abstraction, administration, audit and accounting services. Headquartered in Pittsburgh, PA, we are a global boutique firm, providing high-quality services to top-tier clients across industry verticals, covering every type of lease and on any lease platform. We are proud to be a trusted partner, for 17+ years, to leading retailers, REITs, property owners/managers, and corporate accounts seeking a strategic advantage. All client projects are performed in-house.