The CAM reconciliation checklist

The annual CAM reconciliation has a deadline that is written in the leases and a start date that is not written anywhere, and most of the trouble comes from the gap between the two. The deadline is usually stated as a number of days after the end of the calendar year in which the landlord must deliver the statement. Practitioner sources put the common range at 90 to 180 days, with 120 days appearing often in model clauses, and the lease decides; where it is silent, the shortest deadline among the property’s leases is the one to work to. For a December year end that means statements out between the end of March and the end of June, and the work that produces them has to start in December.

This is the checklist written against that calendar. It runs from the pre-close tasks in the last weeks of the year through the pull, exclusions, gross-up, allocation, caps and base years, the true-up, review, delivery, the dispute window, and the estimate reset for the following year. Each step says what can go wrong and what to keep as evidence, because the statement will be questioned — by a tenant, an auditor or a buyer — long after the person who built it has stopped thinking about it, and the only good answer to “how did you get this number” is a document that already existed when the number was produced.

The weeks below assume a calendar year end and a 120-day deadline, which lands on April

1. Shift them for a different year end or a different deadline; the order does not

change.

The calendar at a glance

Each step follows in the same order.

Before the books close

1. Accrue December invoices

Operating expenses incurred in December but invoiced in January belong to the year on an accrual basis and to the following year on a cash basis. Whichever basis the reconciliation uses — and the lease rarely says, so the owner’s reporting basis is the usual answer — it has to be the same basis the base year was built on, and the same one used last year. What goes wrong is a utility bill or a snow-removal invoice that lands in whichever year happens to be open, which moves the pool by a few thousand dollars in a direction that favors nobody in particular and that no one can explain in April. Keep the accrual list with the invoice copies attached and the date each was posted.

2. Confirm capital versus repair postings

Go through the repairs and maintenance account and any account that could hold a replacement, and confirm that each item is a repair under the lease’s definition of capital — commonly a useful-life or dollar-threshold test — rather than under the bookkeeper’s judgement. In the Harbor Point Plaza example the roof replacement for Building A, $180,000, sat in 6800 Repairs & Maintenance and had to be found; posted to 1540 Capital Improvements it would never have entered the pool. Where the lease allows capital to be amortized into the pool, the amortization schedule is created here. Keep the reclassification journal and the lease clause it was tested against. The setup post covers how the chart of accounts can make this step short.

3. Confirm occupancy by month

The gross-up needs actual occupancy for the year, and the fair figure is a weighted average by month, not the occupancy on December 31. A tenant who moved out in September and a tenant who moved in in November produce a different average from a rent roll that only shows the year-end position. Get the property manager to sign a monthly rent roll showing occupied rentable square feet for each month, and compute the average from it. What goes wrong is using the leasing team’s figure, which counts signed leases rather than occupied space. Harbor Point Plaza was 80% occupied through 2026 on this measure.

The pull and the adjustments

4. Pull the expense pool

Run the Profit and Loss Detail for the property for the full year, filtered to the property’s location or class and to the recoverable account range, on the basis chosen in step 1. Export it, date the export, and record the filters used. This is the number everything else is derived from, and the question that will come eighteen months later is whether it matched the books at the time; a prior-period adjustment posted in July makes the live report different from the one the statement was built on. For Harbor Point Plaza the pull was $1,240,000 as posted.

5. Apply exclusions

Remove what the leases say is not recoverable. The usual list is capital improvements, leasing commissions, the owner’s own legal and financing costs, and anything the lease names specifically. Where leases differ — one tenant’s lease excludes management fees above a stated percentage, another’s does not — the exclusion is per lease and belongs in step 9 rather than here. At Harbor Point the roof, $180,000, leasing commissions, $44,000, and refinancing legal, $16,000, came out, a total of $240,000, leaving a pool of $1,000,000. Keep an exclusion schedule listing each item, the amount, the account it was in, and the lease section that excludes it. What goes wrong is an exclusion applied because it was applied last year, with nobody able to say which clause requires it.

6. Gross up variable expenses

If the leases provide for it, gross up the expenses that vary with occupancy to the stated occupancy, and leave the fixed ones alone. Variable at Harbor Point — janitorial, utilities, trash — totaled $400,000; at 80% actual grossed up to 95%, that is $400,000 × (95 ÷ 80) = $475,000. Fixed — insurance, landscaping, security, management — stayed at $600,000. Grossed-up pool $1,075,000. Grossing up the full $1,000,000 would have given $1,187,500, and the extra $112,500 is expense nobody incurred. Keep a worksheet showing, per account, whether it was treated as variable, the actual occupancy used, the stated occupancy, and the adjustment; a tenant auditor will ask for exactly that. The arithmetic and the base-year consequence are in gross-up clauses, explained.

7. Build recovery groups

Where different tenants share different categories — retail tenants paying for the parking lot that office tenants do not use, one building’s lobby costs shared only by that building — split the pool into groups and assign each tenant to the groups its lease names. Keep the group definitions with the lease sections that justify them. What goes wrong is a group created for one tenant’s lease negotiation and never documented, so that the next year’s reconciliation either forgets it or applies it to everyone.

Allocation and the lease’s own limits

8. Allocate shares

Apply each tenant’s share to each group. The share is usually rentable area over the property’s rentable area, but the lease defines both the numerator and the denominator, and some leases use occupied area, or a fixed percentage, or a different total for a different group. Brightleaf Yoga in Suite 210, 8,000 RSF of 100,000, is 8.00%, and 8.00% × $1,075,000 = $86,000. Keep a share schedule listing each tenant’s RSF, the denominator used, and the resulting percentage, because a change in the building’s rentable area after a remeasurement changes every share at once.

9. Apply caps and base years

Each lease’s own limits go on now, in the order the lease states. A base-year lease deducts the tenant’s share of base-year expenses, computed the same way as the current year; Brightleaf’s 2023 base-year share is $74,000, so recoverable is $86,000 − $74,000 = $12,000. A cap on controllable expenses needs the pool split into controllable and uncontrollable first, and needs every prior year’s billed figure if it is cumulative or measured from the prior year’s actual. The three cap mechanics on the same 5% produce 2026 ceilings of $57,500, $57,881 and $61,425 on the same costs, which is why the lease language, not the percentage, has to be recorded. Keep a per-lease schedule showing the base-year figure and its basis, the cap mechanic, the ceiling for each year of the term, and the order of operations. Base year versus expense stop covers which inputs each structure needs.

10. True-up against estimates

Compare the recoverable amount with what the tenant paid in estimates during the year, taken from the ledger rather than from the lease. Brightleaf paid $900 × 12 = $10,800, so the true-up owed is $12,000 − $10,800 = $1,200. What goes wrong is using the scheduled estimate when the tenant actually paid a different amount for part of the year, or counting a January payment of the December estimate in the wrong year. Keep the estimate billing history per tenant, exported from the ledger. The calculator runs this chain from pool to true-up for your own figures.

Review, delivery and after

11. Review the statements

Before anything is sent, someone who did not build the reconciliation reads each statement against last year’s and against the lease. The useful checks are few: does the pool reconcile to the exported report plus or minus the exclusion schedule; does every tenant’s share add to the pool for each group; is the gross-up applied only to the variable accounts; is each base year on the same basis as the current year; are the year-over-year movements per tenant explainable. A tenant whose true-up moved from a $300 credit to a $1,200 bill will ask why, and the reviewer should be able to answer before the tenant does. Keep a signed review sheet with the prior-year comparison. The sample statement shows the layout a statement that survives this review tends to have.

12. Deliver to tenants

Send each statement with its supporting schedule in the manner the lease requires — some specify certified mail or a named notice address — and record the date and method per tenant, because the dispute window runs from delivery and so does the deadline. A statement delivered on day 125 against a 120-day clause has, in some leases, waived the landlord’s right to collect the shortfall; whether yours does is a question for the lease and, if it is ambiguous, for counsel. Keep the delivery record.

13. Work the dispute window

Leases commonly give the tenant a stated period after receiving the statement to object or request an audit — 30 to 90 days is common in the practitioner literature, with some leases allowing six months, a year, or longer, and some requiring the undisputed amount to be paid meanwhile. The landlord is then usually given around 30 days to produce the general ledger extract, invoices over a threshold, the gross-up worksheet, the management-fee calculation and the occupancy report. Every one of those is something the checklist above has already created. Keep an inquiry log recording each question, who answered it, what was sent and when, and whether the statement was revised. A revision to one tenant’s statement that changes the pool changes every tenant’s, which is the strongest argument for not revising anything without re-running the whole year.

14. Reset estimates for next year

The reconciliation is also the best available forecast. Set next year’s monthly estimates from this year’s recoverable figure per tenant, adjusted for known changes — a new contract, a tax reassessment, a lease that reaches its cap — and send the estimate notice in the form the lease requires. Brightleaf’s recoverable of $12,000 suggests an estimate nearer $1,000 a month than the $900 billed. Keep the estimate schedule and the notice. What goes wrong is leaving estimates unchanged for years and producing a true-up large enough to be disputed on principle rather than on arithmetic.

What makes the next one easier

Almost everything on this list is evidence of a decision rather than the decision itself. The exclusion schedule, the variable and fixed classification, the recovery groups, the cap mechanics and the base-year figures are stable from year to year; what changes is the pool. When those decisions are recorded once as properties of the account and the lease, the annual work is steps 1 to 4 and 11 to 14, and the middle of the list is a re-run rather than a rebuild. Where the reconciliation runs in Ledgerstone, the recovery rules live on the lease, the reconciliation shows the derivation behind every figure, and the period is sealed once the statements go out — which is the evidence layer the dispute window needs, kept at the moment the number was produced rather than reconstructed when it is questioned.

Related reading

• What a CAM reconciliation actually involves — the sequence behind steps 4 to 10, with the same worked example.
• A QuickBooks Online setup for CAM recovery — the file structure that makes steps 2, 4 and 5 short.
• Gross-up clauses, explained with the arithmetic — step 6 in full.
• Base year and expense stop are not the same thing — the inputs step 9 needs.