Common Area Maintenance (CAM) statements are essential to commercial real estate leasing. These statements ensure that the tenant and landlord share the maintenance and operational costs of the property’s common areas fairly.
What Expenses Does a CAM Reconciliation Cover?
CAM reconciliation covers various operating expenses associated with commercial property, including costs such as:
Property Taxes
Property taxes are typically one of the largest expenses included in a CAM statement. These expenses can include real estate taxes, special assessments, and other taxes levied against the property. These expenses don’t have any expense caps because a landlord can’t control them.
Common Area Maintenance
Common area maintenance (CAM) expenses are another significant cost included in the statement. These expenses can include landscaping, snow removal, security, and other maintenance costs associated with common areas of the property. Most of them are controllable CAM expenses.
Utilities
Utilities entailing electricity, water, gas, and sewage can also be included in the CAM statement. These expenses can be significant, especially for properties with high energy usage. Like taxes, utilities are also one of the uncontrollable CAM expenses a landlord cannot regulate.
Key Components of a CAM Statement
A CAM statement has certain key components, and if you understand them, managing your CAM expenses become easier:
Tenant Information
The Tenant Information section of the CAM reconciliation report or CAM statement typically includes the tenant’s name and address, the leased space’s square footage, and the lease agreement’s start and end dates. This information is necessary to accurately calculate the tenant’s proportionate share of CAM expenses.
Annual Expenses
The Annual Expenses section of the CAM statement lists all the expenses incurred by the landlord for common area maintenance during the previous year, broken down into categories such as utilities, repairs, maintenance, insurance, and property management fees. The tenant’s proportionate share of these expenses is calculated based on the leased space’s square footage compared to the property’s total square footage.
Escrow
The Escrow section of the CAM statement shows the total amount of money that the tenant has paid into an escrow account which is regulated by a third party like a property manager to cover their share of the estimated CAM expenses for the year. A tenant pays this amount in monthly installments.
Balance
The Balance section of the CAM statement shows the difference between the actual CAM expenses incurred by the landlord and the estimated expenses that the tenant has paid into the escrow account. If the actual expenses are lesser than the estimated expenses, the tenant will have a credit balance that can be applied to future rent payments.
Tenant Share
The Tenant Share section of the CAM statement shows the proportionate share of the actual CAM expenses that the tenant is responsible for paying. This amount depends on the square footage of the leased space.
Why are CAM Reconciliation Statements Important?
CAM statements are critical for both tenants and landlords because they are beneficial for both parties. Here’s how:
Transparency and Verification
CAM statements provide transparency and accountability for the tenant, enabling them to verify the costs incurred by the landlord for common area maintenance. By reviewing the actual costs, tenants can ensure that they are being charged a fair and accurate amount for CAM expenses. This helps to prevent disputes between the tenant and landlord over CAM costs and promotes a more transparent leasing process.
Fair Distribution of Costs
CAM statements ensure that the costs of maintaining and operating the common areas of a property are shared fairly among all the tenants. By requiring tenants to pay their fair share of CAM expenses, landlords can avoid bearing an unfair financial burden for common area maintenance. Usually, the tenant who has a larger area bears a greater percentage share of the CAM expenses.
Protection Against Overcharging
CAM statements protect tenants against being overcharged for CAM costs. Without these statements, the landlord could overcharge the tenant for CAM costs, leading to an unfair financial burden. By requiring the landlord to provide a detailed breakdown of the actual costs incurred, tenants can be confident that they are not being overcharged for CAM expenses.
Conclusion
To conclude, the CAM statement is a comprehensive report that is useful for both tenants and landlords. Therefore, understanding the details mentioned in this blog is vital and can come in handy for people who want to learn more about CAM statements.
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