Clear CAM review can steady costs, support cleaner reporting, and strengthen owner‑tenant alignment across a real estate portfolio.
Common area maintenance (CAM) charges are a foundational element of commercial real estate operations, encompassing shared spaces such as lobbies, parking areas, hallways, and landscaping. For both landlords and tenants, these costs support the property’s day‑to‑day functionality through a structured cost‑recovery process.
Because CAM expenses fluctuate and are frequently based on estimates, they require consistent, objective oversight. Regular audits of CAM charges and chargebacks can help protect all parties involved.
Aligning lease terms with financial integrity
Accurate CAM billing begins with a well‑constructed commercial lease. Clear lease language establishes which operating expenses are recoverable, how costs are allocated among tenants, and the methodology used for annual reconciliations. Whether the agreement is a triple‑net (NNN) lease — where tenants bear taxes, insurance, and maintenance — or a modified‑gross structure with more landlord‑retained expenses, the written terms set the foundation for both accounting treatment and tax defensibility.
Increasingly, large landlords and sophisticated tenants are requiring explicit CAM audit rights within lease agreements. This trend reflects a shared recognition that independent review is a practical safeguard against billing errors, disputes, and downstream tax exposure. When CAM obligations are unclear or expense tracking lacks consistency, ambiguity can quickly escalate into financial and compliance risk. Unsubstantiated charges, recurring overbilling, or deviations from the lease erode trust and compromise year‑end reporting positions.
Independent accountants play a critical role in mitigating these risks. By evaluating whether actual billing practices align with the lease’s intent and provisions, they help both parties meet their contractual obligations while maintaining a well‑supported and defensible tax position.
How CAM inaccuracy impacts property tax valuations
One of the most overlooked implications of overstated CAM reimbursements is their impact on property tax assessments. In jurisdictions that rely on the income approach to valuation, a property’s assessed value is tied directly to its net operating income (NOI).
If CAM recoveries exceed actual operating expenses, whether due to poor lease interpretation, inadequate oversight, or misclassification, the result is artificially inflated NOI. Appraisers, unaware of the underlying inaccuracy, may view the higher revenue as evidence of increased property value.
The consequences can be significant:
- Landlords may face inflated property tax assessments based on distorted income figures
- Tenants may inadvertently pay for expenses that are not deductible operating costs, especially when capital expenditures are treated incorrectly as CAM
Ultimately, misclassified or overstated CAM charges can lead both owners and tenants to shoulder unnecessary tax burdens rooted in inaccurate financial data.
Gross receipts taxes: Why CAM accuracy matters even more
The stakes rise even higher in states and municipalities that impose gross receipts taxes. In these jurisdictions, taxes are based on top‑line revenue, which typically includes CAM reimbursements.
If CAM charges include non‑reimbursable items or exceed amounts permitted under the lease, landlords may be overpaying gross receipts taxes on revenue they were not entitled to collect. Because these taxes apply to revenue rather than net income, every dollar of inaccurate CAM billing creates a direct, unnecessary tax expense.
Independent CAM audits help verify that revenue reported for both property tax and gross receipts tax purposes is accurate, supportable, and aligned with contractual terms.
How CLA can help
At CLA, we approach CAM reconciliations as a core tax compliance function. We work with owners, operators, and tenants to uncover inaccuracies and strengthen internal controls. Our approach aims to improve the integrity of reported income, reduce potential disputes, and support clearer communication between landlords and tenants.
By applying independent, disciplined review methods, we can help clients achieve stronger portfolio performance through improved oversight of recoverable expenses, more defensible property valuations, and more accurate tax reporting. Whether you manage one property or a multi‑state portfolio, CLA can bring clarity, consistency, and confidence to your CAM processes.