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Avoiding CAM reconciliation disputes

On Behalf of | Mar 31, 2021 | Commercial Real Estate |

Common area maintenance reconciliation describes the process of calculating the costs of CAM in an office building or other commercial property. Generally, the landlord or property management company divides these charges among the tenants.

Review these best practices to avoid tenant disputes about CAM reconciliation, which can be expensive and time-consuming.

Detail CAM items

Every commercial building has different CAM needs based on its size, function and features. The commercial lease should list the items covered in CAM, such as cleaning, repair, maintenance, trash services, security services, repair and maintenance of parking areas, snow removal services, landscaping services, and related needs.

The lease should also indicate other costs associated with CAM. For example, many properties charge tenants a 10% interest rate on prepaid maintenance expenses.

Establish division structure

Most commercial leases add the CAM fee on top of the base rent. The most common structure involves charging each tenant a proportional share of CAM based on the percentage of the building they occupy. Buildings that use a gross lease in which tenants pay the rent upfront in a lump sum also charge CAM as an upfront cost for the entire lease term.

The lease should also clarify the reconciliation process for CAM. Because these costs can vary over the terms of the lease, the property manager will periodically compare the actual charges to the fees paid by tenants. At that point, tenants may either receive a refund or owe an additional amount for CAM.

Creating and maintaining a comprehensive commercial lease can reduce the risk of reconciliation conflicts with tenants.