Common Area Maintenance (CAM) reconciliations can prove to be nerve-straining for you as property owner or manager if done erratically. We know how real estate accounting can turn out to be a tricky task if not religiously done on time. To steer clear of any inconveniences or error potential, we have always adhered to certain rules for CAM reconciliation. These tips would prove to be of real help when collating bills and finalizing accounts.
It may sound hackneyed, but most of the discrepancies in CAM charges show up due to a late receipt of invoices by your tenants. You need to follow-up with your property manager to ensure that payment against all CAM invoices is done within the time for avoiding any year-end hassle. It would also help in counter-checking if all components of CAM have been captured.
A few of our real estate clients have entered into an agreement with the tenants that stipulates payment of interest due on the annual amortized value of the capital cost of the property. The interest would be payable for the tenure of the lease. They make it a point to collect the amortized value as well as the interest accrued from the tenants. If you have also made a similar arrangement, never overlook the interest component while reconciling.
If you have sought the services of a professional property management firm to look after your leased out area, always make it a point to collect the management fee from the tenants. Normally, this fee would be in the range of 3-4% of the lease charge. However, it would be unwise to waive off the fee just to keep the tenant happy. Avoid your accounting calculations from going haywire by collecting the stipulated fee.
Irrespective of whether your property experiences full or partial occupancy, you need to levy certain charges on tenants considering that the occupancy was full. For annual property accounting, services related to janitor, electricity, water, etc. can be applied on CAM for existing tenants. You can exempt expenses incurred for luxury or redundant services like gardening, etc. from the CAM fees of tenants.
Once all the lease related expenses are calculated, apportion the CAM charges to tenants based on the ‘Gross Leasable Area’ occupied by each. Ensure that the accountant always counter check the calculations a number of times to figure out any inadvertent error. This ensures that the owner/firm is relieved of any dispute after the presentation of bills. Proper CAM accounting is critical.
To escape from any protracted dispute over CAM reconciled reports, ensure that the details of costs charged, distribution ratios, and other relevant expenses are properly documented. Often industrial clients may demand an audit of the CAM charges and if you fail to produce tenable records, you can invite legal troubles.
Follow these simple tips to sit back and enjoy the revenue generated from your property. Hope you can have a breezy life with proper CAM reconciliations.
OHI is a thirteen-year-old real estate services company working with 50+ commercial and residential real estate developers, funds and property management companies across USA. Our deep expertise in real estate accounting, financial analysis, lease administration and asset management has helped clients cut associated costs by 40-50%. We currently provide these services to a portfolio of 75000 units across clients.
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