Common area maintenance is one of the three main components that make up operating expenses, the other two being insurance and property taxes. This, in turn, makes CAM part of what is called a Triple Net (NNN) Lease.
Common Area Maintenance (CAM) expenses are fees paid by tenants to landlords to help cover costs associated with overhead and operating expenses for common areas. Common areas are spaces used for or benefited by all tenants and include, but are not limited to, hallways, elevators, parking lots, lobbies, public bathrooms and building security.
CAM expenses are usually defined in the lease to clear up any ambiguity as to what they entail. It is important to have a clear understanding of these expenses before signing a new lease.
Begin with Budgeting:
The CAM process begins during the previous year’s budget process when a budget is created for the property. The tenant’s CAM estimates are calculated based on the budget and reflect the pro rata share and any other nuances stated in the lease.
Throughout the Year:
Tenants are billed (usually monthly) for their share of budgeted expenses. These expenses will vary based on the lease types which can range from a Net Lease, in which the Landlord passes through all the expenses and the investment is protected from inflation and losses due to increases in market value to a Gross Lease, in which the Landlord receives a fixed sum regardless of operating costs. In between there are as many variations as can be thought of by man, attorney, or broker.
Estimates are comprised of recoverable expenses associated with managing, operating, maintaining and repairing the building. These will include HVAC, plumbing, management salaries, elevator, landscape management, lot sweeping, management fees, pest control, roof repairs, property insurance, FMR (fair market rent) for PMO (property management office), common area association fees, utilities, security, R&M salaries, postage, and more.
March and April Key for CAM Reconciliation:
During March and April of the following year the actual expenses are reconciled for previous year expenses. Tenant’s billing for the prior year is reconciled against their share of actual expenses. Tenants should be sent an invoice showing amount owed or due.
- Speciliazed expertize team members to manage large portfolios for CAM reconciliations.
- Minimum 4+ years of experience.
- Accurate reconciliations with recommendations on billing changes for improvements.
- Efficiency improvement to complete the reconciliations on time to raise the invoice.
- Handle billing disputes and revert back to the clients per the TAT.
- Managing complex reconciliations to simply the billing process year on year.
- Year on Year benefits with improved reconciliations helping the clients manage their portfolios.