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How to Get Common Area Maintenance (CAM) Reconciliation Right

Common area maintenance (CAM) is what tenants pay a landlord to maintain shared spaces, such as lobbies, cafeterias, and restrooms. While every lease establishes the unique parameters for these costs, your CAM payments are typically pro-rata, meaning they’re based on the percentage of useable square footage your business pays for.

In a shopping center, for example, the retailer with the largest store will usually pay the greatest percentage of costs for security, landscaping, cleaning, and repairs related to the shared space.

Since these costs can’t be completely known in advance, landlords often estimate them using historical data and divide them into monthly payments. While the aim is to be as accurate as possible, this inevitably leads to discrepancies between what you’ve paid a landlord and what you actually owe according to the lease.

And that’s where CAM reconciliation comes in.

CAM reconciliation is the process landlords and tenants use to evaluate whether the amount a tenant paid in CAM charges was correct. This often results in a landlord reimbursing a tenant for overcharges or a tenant having to make up the difference.

Depending on the lease, CAM reconciliations may be due within 30 to 90 days after December 31. So you have a narrow window to compare what your landlord charged to what they paid and what your lease requires from you. A lot of retailers and corporations miss out on major savings because neither they nor their landlords notice an overcharge.

In this article, we’ll look at why CAM reconciliation is so difficult, and how to make sure you get it right—so you’ll never be on the hook for charges you don’t actually owe.

Why are CAM reconciliations so hard to get right?

Every lease is unique. While the wording may be the same as dozens of others in your portfolio, how it applies to your common area maintenance charges depends on the specific location, your co-tenants, and other circumstances that change throughout the year. In order to know what charges you’re really responsible for, you have to have an intimate familiarity with the terms of your lease, so you can accurately evaluate the charges your landlord has claimed.

So why do landlords often get this wrong? Same reason.

It’s extremely difficult to navigate the nuances of individual leases, especially at scale. Not to mention, in a single shopping center or office building, there may be numerous tenants, each with similarly worded—yet ultimately unique—leases. It’s easy to miss a clause or circumstance that lets a tenant off the hook for a specific charge.

Tango Lease’s CAM/OPEX Reconciliation tool automatically identifies relevant terms and audits charges from your landlord, ensuring that you never pay expenses you aren’t responsible for.

Lease terms will vary, but here are some common examples that can come into play during the reconciliation process:

Exclusions

Some leases prohibit landlords from charging CAM expenses for particular items, where you’ve essentially stated up front, “This is not my responsibility.” Unless the lease explicitly states that they are, you can also negotiate whether they should be excluded afterward.

For example, if your landlord is reimbursed for an expense through another means, they shouldn’t “double dip” and collect payment from you as well. Or, if you’re paying for an expense directly with a vendor or utility provider, that’s not something your landlord should also charge you for.

Recent transitions

If you’ve recently moved into a new location or moved out of one, your CAM expenses shouldn’t be based on an entire year of renting. It needs to be adjusted to the time you spent in the facility. But it’s not uncommon for these adjustments to get overlooked.

Expense limits

Your lease may include caps for specific types of expenses, particularly if it’s a controllable expense like marketing, advertising, labor, or supplies. Expense limits establish an acceptable level of cost increase that you will be responsible for. Anything beyond that expense limit falls on your landlord’s shoulders.

How to avoid CAM overpayments every time

Retailers and corporations like yours make CAM overpayments all the time. It happens because both landlords and tenants lack the tools to efficiently navigate their lease portfolios. Even with a massive lease department, you’re bound to have human errors, especially with how difficult it is to detect some overcharges.

Tango Lease organizes your entire portfolio into an easily searchable database. Using artificial intelligence and machine learning, Tango’s CAM/OPEX Reconciliation tool crawls your leases and landlord charges to identify expenses you aren’t responsible for. Our software automatically audits and reconciles these expenses, freeing your team to focus on accounting opportunities that demand more of their expertise.

Want to see how Tango Lease streamlines CAM reconciliation?

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