Question

When reconciling Common Area Maintenance charges at the end of a fiscal year, what document must the landlord produce to prove that the expenses charged to the tenant are accurate and permitted by the lease?

Accepted Answer

To prove that Common Area Maintenance, or CAM, charges are accurate and permitted, the landlord must provide a detailed reconciliation statement accompanied by an expense audit report or ledger. CAM charges represent the tenant&#x27;s proportional share of the costs required to operate and maintain shared portions of a property, such as parking lots, lobbies, and hallways. The reconciliation statement compares the estimated CAM payments the tenant made during the fiscal year against the actual expenses incurred by the landlord. To verify these costs, the landlord must provide an itemized general ledger that lists every expense charged to the CAM pool, along with supporting documentation such as invoices, receipts, and service contracts for third-party vendors. These documents demonstrate that the expenses were actually incurred and align with the specific definitions of operating expenses outlined in the lease agreement. For example, if a lease specifies that capital improvements like replacing a roof are excluded from CAM, the ledger and supporting invoices allow the tenant to confirm that such costs were not improperly passed through to them. When required by the lease, the landlord must also provide an annual statement certified by a third-party accountant, which validates that the reported expenses match the property financial records and comply with the governing terms of the lease.

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When reconciling Common Area Maintenance charges at the end of a fiscal year, what document must the landlord produce to prove that the expenses charged to the tenant are accurate and permitted by the lease?