Common area maintenance (CAM) charges play a key role in the upkeep of the commercial property. CAM fees, as known, as charges passed on to the tenants by the landlord that accounts for the operating expenses of a property. Typically, CAM charges are in Triple Net leases, that also includes property taxes and insurance. CAM charges are calculated on a pro rata share basis and the terms are included in a mutually agreed lease contract.
At the end of the year, property managers are required to reconcile CAM charges to validate the expenses and verify whether or not expenses have been covered accurately. CAM reconciliation for commercial properties has always been a complex and tedious task. However, with the COVID-19 outbreak and its disruptive impact on both tenants and landlords under commercial leases has compelled landlords to revisit the CAM charges address the obligations and provision as per the new operational standards.
Reconciling CAM charges during pandemic
The CAM charges are estimates, so at the end of the fiscal year property managers verify and reconcile the actual cost incurred against the CAM charges paid by the tenant. In case of excess payment, credit is provided credit is provided to the tenant for the next year and if it is less, then, the tenant is responsible to pay the difference. Reconciliation under normal circumstances is straightforward albeit tedious. However, this year (2020), in the face of coronavirus impact on real estate, reconciliation of CAM charges has emerged to one of the most complex and challenging tasks.
Intermittent lockdowns, social distancing norms, and other safety measures have compelled landlords to place certain restrictions in the use and access of common areas. Such measures and limited access to common areas have in turn led to renegotiations of lease terms, resulting in CAM charges discounts, reimbursements, or adjustments. Commercial landlords have had to revisit the provisions and make adjustments to lease to ensure tenants are not taxed unnecessarily, while in other cases adjustments are made to provide tenants access common area in a useful way. Irrespective of the type of adjustments made, all these new provisions need to be accounted for during the reconciliation process. And it has to be done very carefully and meticulously as the business is under immense pressure to save costs as well as maintain the relationship.
Outsourcing CAM recon to a specialized partner
Commercial property managers are already under immense pressure to optimize portfolio performance as companies slowly begin the recovery process. Having to reevaluate, re-estimate, and reconcile CAM charges would only compound the challenges, making the process difficult and error prone. This is where partnering with a specialized service provider who is knowledgeable can offer great benefits to the landlord. A dedicated outsourcing partner can help landlords and property management companies easily navigate through the renewed lease provisions, new adjustments, and discounts and meticulously reconcile CAM charges that are accurate and as per the lease terms.
Tell us your CAM reconciliation issues and we can help you overcome those hurdles. Springbord has been helping commercial real estate companies optimize portfolio performance and boost the bottom line through a range of dedicated services. Talk to us today to find out about our custom solutions.