CAM Reconciliation

How the process works

Under most net leases and many modified gross leases, tenants pay monthly CAM estimates set at the start of the year. After year end, the landlord prepares a reconciliation statement comparing collected estimates against actual expenses, allocated by each tenant's pro rata share. The statement drives either a catch-up billing or a credit, and typically resets the following year's estimates.

What the lease controls

• What counts as CAM: definitions and exclusion lists vary enormously — capital items, management fees, and reserves are the usual battlegrounds.
• Caps: many leases cap annual increases in controllable CAM, sometimes on a cumulative and compounding basis, sometimes not.
• Gross-up: in buildings with vacancy, variable expenses are often grossed up to a stated occupancy level so in-place tenants pay a representative share.
• Audit rights: tenants commonly negotiate a window to review the landlord's books — a right that expires if it goes unexercised.

Because these mechanics differ lease by lease, the same reconciliation statement can be right for one tenant and wrong for its neighbor.

What to watch for

Deadlines cut both ways: leases often require the landlord to deliver the reconciliation within a stated period and give the tenant a limited window to object, after which the statement may become binding. Exclusion lists in older leases may not anticipate newer cost categories, and amendments sometimes change the pro rata share or the cap without anyone updating the billing setup.

In your documents

Reconciliation season is a lease-language exercise: what does each lease define as CAM, what is capped, what is excluded, and by when must the statement go out? Sevrel is designed to answer questions like these with links back to the retrieved lease sections — part of lease analysis — so whoever is checking a statement can verify the operative clause rather than rely on memory.