CAM reconciliation is a complex, strenuous, and time-consuming task.
CAM is the standard area maintenance charge passed on to the tenants. CAM charges typically include the standard operational and maintenance of common areas of the property. There is no unified template for CAM cost for properties, and it varies depending on the property, landlord, and market value. Though CAM costs are beneficial for the landlords/property owners to accelerate their return on investment, the CAM cost evaluation is tricky.
It costs to own and manage a property, and the recovered CAM charges go towards the property maintenance. While each lease is different, some of the fundamental CAM charges include,
- The salary of the security and property staff.
- Repairs and janitorial services
- Permits, property tax, and management fees
- The cost of CAM is to maintain the property.
Best Practices for CAM Reconciliation
CAM Reconciliation is a complicated process that involves maintaining the paperwork for work orders, janitorial services, sudden repairs, maintenance invoices to derive a proper CAM calculation. Real estate firm rely on the invoices and paperwork to evaluate and distribute the CAM share amongst the occupants. Since much work goes into it, expert help is necessary for CAM reconciliation to determine reasonable charges. Some of the notable best practices of CAM reconciliation are as follows.
Review And Document The Expenses
Reviewing the expenses is time-consuming and a tedious process. However, it is a crucial step to go through the CAM reconciliation process meticulously. Owners with diverse property portfolios often struggle to review the invoices and estimate the CAM fees. In addition, there is a high chance for your in-house team to lose essential details when they have other primary responsibilities in property management.
Outsourcing CAM reconciliation services allows the in-house team to devote their hours to the financial growth of your business. Therefore, one efficient way to avoid errors in CAM reconciliation is by matching the invoices with their respective account or the property. Some of the practical steps to review the expenses are
- To categorize the expenses month by month,
- Verify and note missing invoices from vendors
- Compare the current CAM report with the previous year’s reports.
Reimbursement or credit due often causes friction between tenants and landlords. Moreover, it isn’t easy to resubmit the missed CAM charges to tenants and follow up for a refund or credit.
Property Management Fees
Most real estate firms utilize an independent property management company or dedicated internal team to manage the properties. So, the property management fee isn’t an out-of-pocket payment; it is a part of the property management, and it is solely rightful to be included in the CAM reconciliation. Though the management fee ranges from 3% to 4% of the lease amount, some tenants may have a problem paying the property management fee. Explaining the charge before signing the lease or conducting a lease audit can help clear any doubt with the property management fee payments. When you go lenient for few tenants, you will end up with
- An unbalanced ledger and
- Shows poor precedent.
Validity And Accuracy Of CAM Fee Calculations
Multi rental premise owners often use similar CAM calculations for all tenants. In such cases, landlords might not consider the exclusions negotiated by the tenants. For instance, Commercial property owners might include capital improvements of the property to CAM charges. So, capital improvement is usually made to improve the property’s value, which are not ideal CAM fee inclusions. Before sending out the CAM expenses ensure that the charges are accurate and verified with the appropriate account or the building. Things to look for before presenting the CAM costs,
- Calculate the months of a tenancy
- Triple check the pro-rata share and
- Stipulate expenses based on the occupancy level.
Expect Lease Audits
Lease audits are beneficial for both tenants and landlords. It gives unbiased clarity between a landlord and tenant. Lease audit verifies if the CAM cost is calculated as per pro-rata-share of the rented space. Lease auditors examine the invoices related to the property and cross-verify it with the lease terms to confirm whether either party fulfills their lease obligations. In any case, it is proactive to be ready for an audit. To avoid any discrepancy during the lease audit,
- Calculate the CAM distribution share
- Check the actual costs charge and
- Code the invoices with their property.
A lease audit service provider can provide a premium lease abstract, thorough lease audits, and protect the firm from legal issues.
Timely Invoice
An invoice generation should be a priority task that happens on a timely basis without any delay. Moreover, a delay in the invoice shouldn’t be the reason for holding out the CAM payments. Since it is the charge that directly goes into the maintenance and operations of the property, the timely collection ensure regular upkeep of the property. How to ensure timely CAM cost payments,
- A scheduled CAM invoice generation and
- Remind the tenants of the CAM charges.
Maintaining a considerable property portfolio is an immense task, let alone the CAM cost recovery process. A detailed CAM cost report can streamline the entire workflow and manage multiple assets efficiently. In addition, streamlining can drastically reduce the workload of property managers.
Why Is PreludeSys Apt For CAM Reconciliation?
Everyday operations of a real estate firm deal with countless vendors, property improvements, occupants, and invoices. It is an uphill task to review and organize the expenses based on property and events. Though a real estate firm can handle the process, the CAM cost calculation calls for utmost accuracy and time. In addition, outsourcing the CAM reconciliation to a service provider offers
- An accurate estimate of tenant’s pro-rata share
- Legible CAM reconciliation report
- Uncover overestimated or underestimated charges
- Avoid future disputes between landlords and tenants.
It isn’t easy to calculate the precise repair and maintenance cost for the property prior to the work order or impromptu repairs. The charges are likely to be approximate from previous years’ CAM reconciliation. So, CAM charges calculation should be validated with the highest level of transparency to avoid future disputes, and most legal issues arise regarding CAM charges. Outsourcing CAM reconciliation and lease services can help save your firms’ time and money in the long run.
PreludeSys is a trusted name in lease services that has been offering impeccable lease services for over a hundred clients worldwide. Thus, partnering with PreludeSys for all lease-related services will give the real estate brand an upper hand with effective decision-making and future developments. If you are interested to learn more about our lease services, get in touch with our expert today. Not sure whether your CAM is reasonable or overestimated? Uncover it with our experts.
FAQ
Who is responsible for CAM reconciliation?
Landlords’ practice for property owners is responsible for CAM reconciliation.
How can you improve CAM reconciliation efficiency?
Property managers are often overburdened with lease administration making them unable to concentrate on the CAM reconciliation process, thus leading to errors in CAM calculations. Outsourcing CAM reconciliation to a competent team offers timely and accurate CAM reconciliation.
