CAM Reconciliation and Audits – the good, the ugly and the savior?
WHAT IS CAM?
Common Area Maintenance (better known as CAM) charges refers to the cost of maintaining (upkeeping and repairing) the common areas shared by tenants. Examples of costs associated to common areas are parking lot maintenance (snow removing and de-icing costs), landscaping, security, janitorial costs, and trash pickup. CAM charges can also include capital expenditures like the repaving of a parking lot or replacing an old HVAC unit.
CAM CALCULATIONS
Now here’s where it starts getting a little ugly – there are a million different ways to calculate CAM charges. Every tenant lease is unique and costs can constantly change. On top of this, amendments can change individual CAM calculations from year to year.
CAM RECONCILIATIONS & AUDITS
CAM reconciliation and audits are an accounting practise of recovering charges for maintenance costs under a lease. It is often NOT however done by accountants, but rather property managers and property management service providers. The preparation of CAM reconciliations can be labour intensive, time-consuming and very cumbersome. Without an eye for detail, uncommon lease clauses can be easily forgotten and ultimately the landlord can leave a lot of money on the table. Having a deep understanding of the terms of each lease can result in realizing the full profit potential of the property.
THE SAVIOR??
Your savior is real estate software – but there’s a catch. Solutions provided by real estate software leaders such as YARDI and MRI will take the manual and tedious work out of CAM reconciliations and audits. These systems will not only save you tonnes of time, it will also ensure you aren’t leaving money on the table. Every month tenants pay an estimated charge for Common Area Maintenance. Actual expenses are tracked in recoverable expense accounts throughout the year, and at end of the year, property management software such as Yardi or MRI can run reconciliation reports which show tenant balance charges/credits. Once calculations are finalized, a reconciliation letter is generated automatically and sent by email to each tenant. By automating CAM reconciliation and calculating commercial recoveries, the software can simplify the process and avoid leasing disputes later. But here’s the catch, setting up your CAM charges and reconciliation can be complex. As with any technology solution, you need to understand your needs and how to put in your individual requirements into these software solutions. It doesn’t help that every lease is unique. This is where working with expert consultants (like those at Assetsoft) can help you get started. The short-term pain of understanding your requirements and setting up your system will provide long term gain in recovered money and time. Not to mention the immeasurable value of peace of mind.