Reimbursable expenses typically include Common Area
Maintenance (CAM), Taxes and Insurance. Reimbursable expenses can account for 33% of
your total rental payment so it is important to review them annually. The lease terms in which the reimbursable
expenses are reimbursed is just as important as negotiating the lease
rate. We will concentrate on the
reconciliation statement for CAM expenses.
CAM
expenses typically include items that require maintenance and/or repair that
are commonly used by all tenants within a certain property. Examples of those costs would include
landscaping, building maintenance, security and cleaning. Those costs will vary
from month to month and year to year.
Some costs are controllable while others are uncontrollable by
landlord. Tenants can mitigate their
risk and cost by properly negotiating the terms in which CAM
is reimbursed.
Learn How To Negotiate
CAM Reimbursements at http://thetenanthandbook.wordpress.com/2013/01/11/how-to-negotiate-expense-reimbursements/
Here are some reasons why a tenant should review or audit
their reimbursable expenses. If a
building has 15 tenants and if each tenant negotiates their CAM
reimbursements differently then a Landlord could end up having 15 different
calculations for CAM
reimbursements. This can lead to errors
in their calculations or interpretation of CAM
reimbursement. CAM
reconciliations are typically done in-house by a Landlord’s employee. That employee can range from having high
experience with CAM
reconciliations to having no experience in CAM
reconciliations. Regardless, a tenant
should always review their CAM
reconciliations and request a break out of all categories being passed through
to tenant.
The Review Process
At the beginning of the year, most landlords will estimate
the total cost for CAM
for the coming year. Each Tenant will be
responsible for their share of CAM
costs based on their lease. Landlords
will try pass as much CAM
costs to the tenant through CAM
reimbursements. This sometimes leads to
a tenant paying more than the lease allows.
Request For Break Out of Expenses
Landlords in general will send a tenant a CAM
reconciliation with a summary of all of the costs. A tenant should request a detail breakout
with backup to better understand all of the expenses.
Compare Historical Expenses
You can request the prior year’s CAM
expense breakout and compare the two to see if there are big differences in
certain categories.
Review The Calculation Of Expenses
A tenant should make sure that the expenses were calculated
based on their lease terms. Also, a
tenant should review how their pro rata share was determined.
Discrepancies
A tenant should discuss any discrepancies or questions with
their landlord to determine whether there is an error in the CAM
reconciliation. Terms can be interpreted
differently and can impact costs.
Audit Expenses
If a tenant doesn’t feel comfortable or doesn’t have the
time to review their CAM
reconciliations then the tenant should seek professional advice. There are companies that specialize in
reviewing and saving tenants money through the auditing of CAM
expenses.
Most leases allow you to audit the CAM
reconciliations within 30 to 60 days of receiving that year’s CAM
reconciliations.
Tenants should review their CAM
reconciliation statements every year. It
is recommended to seek professional advice if you and your landlord have a
difference of opinion.
Is it wise to discuss
your CAM reconciliations with other tenants?
Absolutely, share information if your lease allows you to
share information with other tenants.
Beware that other tenants may have different terms than your lease and
could lead to a different reimbursement amounts. Learning the terms of other tenants can help you
with your next lease negotiation.
Note: Each state and each market will differ from
other states and markets. It is
advisable to ask a real estate professional any questions you might have about
a leasing commercial space. The above
article used general terms which could apply to your state or not. LeaseWithEase provides free consulting to our
clients who use our free website to find their office, retail or medical office
space.
Take A Test Run On
Market Data
Fell free to go to www.leasewithease.net
and test our site for selecting office, medical office and retail space. All you need to do is select “Test” submarket
when entering your search criteria. For
more information please go to www.leasewithease.net.
The Move
Need help with preparing for “The Move” then feel free to
contact LWE with any questions or if you need a referral for getting your
office moved and set up smoothly.
Tenant Vendor List
LeaseWithEase can provide a vendor list to tenants seeking
contacts for installing a security system or a contact for a coffee vendor.
Also, if your company offers services to office, medical office or retail
tenants we would like to include your company in our vendor list for our
clients. Feel free to forward information
about your company and what you provide tenants.
Follow us at:
LeaseWithEase Technology, LLC (www.leasewithease.net)
“Bringing The Local Real Estate
Market To Your Desk”
Alan Gore
Partner
Texas
Broker License #0449773
I am a commercial property manager needed to learn the CAM reconciliation process? Can you guide me?
ReplyDelete