Ensuring A Smooth CAM Reconciliation Process

March 15, 2024

At Caton Property Management, we understand the importance of attention to detail when it comes to managing commercial properties. As we wrap up the year-end financial reports and send them off to property owners, our focus shifts to another crucial aspect of property management: CAM reconciliation reports for tenants.

CAM (Common Area Maintenance) reconciliation is a vital process that ensures fairness and transparency in passing on operating expenses to tenants. It involves identifying qualifying expenses from the previous year and comparing them with what tenants have paid. Here’s how we ensure a smooth CAM reconciliation process:

1. Organization is Key: Before diving into CAM reconciliation, it’s essential to organize all relevant documents and data. This includes financial records, lease agreements, copies of invoices, and any other pertinent information.

2. Identify Qualifying Expenses: Operating expenses eligible for pass-through to tenants typically include common area maintenance, property insurance, and real estate taxes. However, it’s crucial to review lease agreements and lease abstracts to determine any exclusions or limitations on expenses tenants are responsible for.

3. Consult Experts if Needed: Sometimes, determining qualifying expenses can be challenging, especially if they’re not explicitly outlined in lease agreements. In such cases, consulting with accountants, referring to industry standards like BOMA (Building Owners and Managers Association) guidelines, or reaching out to local IREM (Institute of Real Estate Management) chapters for guidance can be helpful.

4. Calculate Tenant Proportionate Share: Once qualifying expenses are identified, calculate each tenant’s proportionate share based on their square footage and lease agreement. This involves comparing what tenants have paid throughout the prior year against what their proportionate share should have been according to what the actual expenses were. If the discrepancy is significant, the CAM charges to the tenants should be adjusted accordingly for the current year.

5. Communicate Results Clearly: Whether tenants owe additional payments or are due credits for overpayment, it’s crucial to communicate the results of CAM reconciliation clearly and promptly. Providing written communication ensures transparency and minimizes misunderstandings.

6. Maintain Documentation: Keep copies of all invoices and calculations related to CAM reconciliation readily available. This documentation serves as evidence in case tenants have questions or challenge the results.

real estate investing 101At Caton Property Management, we prioritize transparency and efficiency in every aspect of property management, including CAM reconciliation. By following these steps and maintaining open communication with owners and tenants, we ensure a fair and smooth process for all parties involved.

If you have any questions or need assistance with CAM reconciliation for your property, feel free to contact us. We’re here to help streamline the process and maximize the value of your investment property.

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