IREM Blogs


Make Sense of CAM, Tax and Insurance Recoveries

September 19, 2019 | IREM

Photo: iStock/IGPhotography

Most commercial properties require tenants to pay a share of the property’s common area maintenance (CAM), property tax, and property insurance costs. The terms of each tenant’s share of these expenses are typically defined in the commercial lease agreement. But it’s the property manager’s job to reconcile the real costs of these shared expenses against the projected costs. If reconciliation results are close to projected expenses, it’s all good. If the real costs are lower than projections, and everyone gets money back, great! But, if the true costs are much higher and the property manager needs to collect more from tenants, credibility and trust are damaged.

It may sound simple, but it’s not that easy. Who decides what those shared expenses are? Who pays what? And all commercial leases are not the same. Different tenants need different things. Some spaces are under construction, or empty, have outdoor seating, or are established tenants that don’t require much beyond parking, landscaping, entrances and lighting.

There are many hidden traps in reconciliations. Enough to make it worth every property manager’s time to get it right. If not, you risk leaving money on the table, or destroying relationships with your tenants. Even if your position today doesn’t require you to perform these reconciliations, you may eventually secure a job that does.

GlobeSt recently sat down with Colleen Nemeth, CPM, CSM. She’s leading a session at the 2019 IREM (Institute of Real Estate Management) Global Summit on the topic of CAM, tax and insurance reconciliations that’s designed for newcomers to the property management industry, but also valuable to seasoned professionals. “If you work mainly in industrial, you might have no idea what’s going on with office or retail,” says Nemeth, who is director of Real Estate at Spectrum Property Management in San Diego. “But then you change jobs and your next position might entail a retail project.”

Avoid mistakes and surprises, and get through CAM, tax and insurance reconciliations smoothly. Read more in GlobeSt from Nemeth on managing this necessary and important responsibility.

In addition to the Global Summit session, IREM offers a CAM, Tax and Insurance Recoveries course online, available to you at any time.

 

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