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Oct. 24, 2021

Handling Annual CAM Reconciliation at a Commercial Property

Handling Annual CAM Reconciliation at a Commercial Property

Common area maintenance charges, or CAM charges, are a routine aspect of commercial property maintenance and expenditure management. When executed properly, common area maintenance charges allocate a share of property maintenance expenses to each commerc...


Common area maintenance charges, or CAM charges, are a routine aspect of commercial property maintenance and expenditure management. When executed properly, common area maintenance charges allocate a share of property maintenance expenses to each commercial tenant.

Transcript

Announcer:
Welcome to the I Love Winnipeg Real Estate podcast. Your premier resource for buying, owning, and investing in Winnipeg's real estate market. And now here's your host, Adrian Schulz, who loves all things real estate, property management, and mortgage financing.

Adrian Schulz:
In today's episode of the I Love Winnipeg Real Estate podcast, I want to speak with you about handling annual CAM reconciliation at your commercial property. CAM of course being Common Area Maintenance charges, commonly referred to as CAM. Now, they're are a routine aspect of commercial property maintenance and expenditure management. When executed properly, Common Area Maintenance charges allocate a share of property maintenance expenses to each commercial tenant in order to maintain clear communication with tenants and ensure that expenses are allocated accurately and appropriately. It is important to make sure accurate calculations and to follow standard notice guidelines.

Adrian Schulz:
Now, here are some considerations when it comes to CAM costs. The idea behind Common Area Maintenance charges is that tenants contribute to the cost of repairs and maintenance to parts of the commercial property that all tenants have access to and have the benefit of enjoying. For example, when the area outside the building is landscaped, a crew is called to remove debris after a storm, or the parking lot is repaved, invoices and charges will be calculated and added to CAM costs. Once all of the relevant information has been gathered, commercial property managers will be able to give tenants notice of such charges and make sure that they are allocated appropriately.

Adrian Schulz:
Here are some things to keep in mind when it comes to CAM charges. First, to collect relevant costs and documentation. The basis of an accurate CAM cost calculation is the collection of all relevant invoices and charges that fall under the umbrella of common area maintenance. It's important that property managers keep track of all relevant maintenance costs that need to be added to the CAM calculation. When doing this, it's essential that property managers have a very clear and precise idea of what expenses fall under the category of common area maintenance.

Adrian Schulz:
As a broad rule of thumb, the repair or maintenance that was performed should be one that benefited all of the tenants of a commercial building. As an example, the replacement or repair of damaged flooring in a shared lobby would be considered beneficial to all tenants whereas the addition of an amenity that was only requested by a handful of tenants would only be used by them would not fall under this category.

Adrian Schulz:
Now, to calculate tenant charges, the best way to allocate CAM is by reviewing the total common area maintenance costs of previous years and using the highest of those figures as a projection of this year's tenant CAM charges. By allocating a higher total to CAM costs, you can assure that tenants will be able to budget that amount, and in the event of overall costs being less than the estimate, you simply have to refund the difference to the tenants. It is much easier and more pleasant to credit a tenant than it is to collect extra expenses over what was initially calculated.

Adrian Schulz:
Now, it's really important to meet deadlines and to follow up. While this concept seems pretty straightforward, it is one that is often overlooked. The deadlines laid out for submitting CAM reconciliations should be complied with in order to ensure that a tenant has sufficient notice of charges. Additionally, it is important that the commercial property manager takes the time to follow up with tenants to ensure that all charges are communicated and any concerns are addressed.

Adrian Schulz:
Proper execution of CAM charges allows a commercial property manager to continue to provide maintenance services and it offers clear communication about charges and expenses to tenants in a timely manner. By carefully calculating and allocating charges, you can ensure that CAM charges are paid and that your tenants understand and abide by the common area maintenance policies that are in place in accordance with their lease. Thank you.

Announcer:
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