The art and science of CAM reconciliation

The end of 2026 is approaching. Have you thought about 2027 common area maintenance (CAM) reconciliations? If not, this is the perfect time to do so.

“The best time to start preparing is before the year even begins with a realistic operating budget,” says Will Curtis, CPM^®, CCIM, managing director & principal at Crossed Sabers Commercial Real Estate in San Antonio, Texas.

One of the most important lessons Curtis has learned over the years is that CAM reconciliation isn’t just an accounting function; it’s also a lease administration and relationship management function. And it’s too important to put off until the last minute.

What is CAM reconciliation?

In a nutshell, CAM reconciliation is the process of ensuring each tenant is fairly charged for their share of expenses related to running the property.

Shared expenses include things like landscaping, lighting, parking lots, snow removal, and trash and recycling services. But there are many others. Consider the open spaces of an outdoor shopping mall—who pays for those areas to be maintained? Typically the tenants, through CAM reconciliation.

Every lease should spell out what expenses are included and the methodology used to determine a tenant’s CAM share.

Tenants usually pay estimated CAM expenses throughout the year, often monthly. At the end of the year, if the actual expenses are lower than what was collected, the tenant receives a credit or refund. If the actual expenses are higher, the tenant owes the difference according to their lease.

“It’s a complicated, simple process,” says Salvatore Dragone, CPM^®, CCIM, principal/director of property management at Rubenstein Partners in Philadelphia. He explains that, while CAM reconciliation sounds like a straightforward calculation of budgeted-to-actual expenses, property managers must consider a variety of lease and occupancy factors to ensure each tenant is charged fairly.

“You need to make sure you have the right numbers to do that simple math,” he says.

Get organized

According to Angela Gomez-Jones, CPM^®, RPA, partner at Endeavor Agency in Southern California, the first step to prepare for CAM reconciliations is to tighten up your budgeting and record-keeping practices.

“You’re reviewing your general ledgers monthly for accuracy, making sure items that are intended to be tenant-specific do not end up in the overall CAM pool. You’re making sure that utilities are being paid on time so it doesn’t mess up your general ledger. You’re tracking occupancy for gross-ups,” she says.

She emphasizes that budgeting is not a set-it-and-forget-it exercise. “A property manager should be doing things throughout the entire year that prepare them for the close of that year’s financials in order to effectively start the reconciliations at the beginning of the next year,” she says.

The next step is to make sure you have all the information you need for CAM reconciliations. Efforts to gather this information should also be happening throughout the year.

“Before I begin the reconciliation, I like to have everything I need in one place,” Curtis says.

This includes:

• General ledger
• Trial balance
• Year-end financial statements
• Operating budget
• Rent roll
• Lease abstracts
• Property tax bills
• Insurance invoices
• Square footage schedules
• Supporting documentation for significant expenses

Start early

Many leases have deadlines requiring CAM reconciliations to be delivered within a specific period after the end of the year. Meeting those deadlines helps avoid collection issues and benefits both parties.

“Timely reconciliations build trust with tenants because they know they’re receiving accurate information while it’s still relevant,” Curtis says. “Also, owners need timely reconciliations to understand the property’s financial performance and cash flow.”

Starting your process early will make CAM reconciliation more successful and less stressful.

“Set yourself up with enough time to complete your CAM reconciliations, so you don’t overwhelm yourself and you’re not left with the bulk of them at the end of your timeline,” Gomez-Jones says. “That timeline is typically done by April at the latest, so reconciliations can be billed on May statements.”

Tips and best practices

Curtis, Dragone, and Gomez-Jones are seasoned property management professionals, with a collective 65 years of CAM reconciliation experience among them. Here are three practices they recommend:

1. Understand your tenants and their leases

“Every tenant may have different expense responsibilities, caps, exclusions, or expense stops,” Curtis says. That’s why it’s important to know every tenant and thoroughly review their leases.

For example, if a new tenant moved in, do they have a base year? When do their CAM obligations start? If it’s a mixed-use building, how are different tenants’ portions determined?

“Even though the retail portion may take up 10% of the space, they’re probably not using 10% of the services,” Gomez-Jones gives as an example. “So it’s very important to make sure building components are clearly listed out in the lease.”

Dragone advises property managers to review leases and ask questions until they understand all the CAM expenses and methodologies. “Because when the tenant calls, they’re not going to call your accountant. They’re going to call you to say, ‘Explain to me my reconciliation,’” Dragone says.

2. Forecast throughout the year

Experienced property managers don’t wait until the end of the year to compare budget-to-actual expenses. They make it an ongoing process throughout the year.

“I monitor budget-to-actual expenses on a regular basis, so I know where the property is heading. By the time December arrives, I should already know within a few percentage points where the property will finish,” Curtis says.

Dragone calls these reforecasts “mini recs,” and he does them quarterly. He views the first quarter as an opportunity to check the accuracy of his data, while the second and third quarters help him determine if adjustments are needed before the end of the year.

“We spend a lot of our time in Q1 making sure we’ve got all the tenants in there, the right proportionate shares, the right caps, the right base years—anything that’s changed since the budget or the end of the year. In Q2, you’re focused more on the expenses themselves,” he says.

This upfront work helps property managers know what’s coming and potentially get back on budget, if needed.

“A year-end CAM reconciliation should never come as a surprise to the property manager,” Curtis says.

3. Communicate with tenants

Reforecasting throughout the year also gives property managers the chance to proactively communicate with tenants about notable discrepancies between estimates and actual expenses.

No estimate is perfect, and it’s always possible for unforeseen circumstances to affect a property’s CAM spend. When that happens, it’s vital to communicate with tenants.

“We’ve had years with major snow removal costs where we’ve given the tenant a warning even at the end of Q2,” Dragone recalls. “I want to make sure the tenant knows what’s going on. To simply give somebody a bill in February or March that they didn’t know was coming is completely irresponsible. It’s a great way of making enemies.”

Curtis points out that many tenants would prefer to see their CAM payments adjusted during the year rather than receive a one-time bill after CAM reconciliation is complete. Upfront communication gives tenants the opportunity to choose the option that’s best for them.

Even a refund at the close of reconciliation might not be greeted as good news. “To some tenants, it’s, ‘Well, you’re holding onto my money. I don’t want you holding onto my money,’” Dragone says.

Keeping tenants informed will go a long way to resolving disputes before they emerge.

Tenants may still have questions about their CAM reconciliation bills, but when you’re familiar with a tenant’s lease, their CAM share, and how expenses have tracked throughout the year, you should be able to quickly provide the supporting information behind the charges.

However, conversations about CAM reconciliation aren’t just about the numbers. They’re also a chance to listen to tenants’ concerns, explain the process, and focus on how to prevent surprises in the future.

“A good manager is going to say, ‘I’m happy to sit down with you and go over all this,’” Dragone says. “But a great manager already told them it was coming.”

Look beyond the numbers

It’s easy to think of CAM reconciliation as just another financial exercise. But in fact, says Gomez-Jones, it’s an art and a science. While some costs are fixed or capped, there’s an art to understanding how to keep expenses equitable and defensible. And there’s an art to making tenants feel valued while running efficient billing and collections.

“At the end of the day, a successful CAM reconciliation isn’t just about accurate accounting,” Curtis says. “It’s about maintaining credibility with both the owner and the tenant while making sure everyone pays exactly what their lease requires.”