CAM Reconciliation Glossary
Plain-English definitions for commercial real estate lease and CAM reconciliation terms — written for property controllers, accounting managers, and CFOs.
CAM Reconciliation
CAM reconciliation is the annual process by which a landlord compares estimated Common Area Maintenance charges collected from tenants during the year against actual operating expenses incurred. Tenants receive a reconciliation statement showing the variance — either a credit or a balance due — based on their pro-rata share of actual costs.
Gross-Up Clause
A gross-up clause requires landlords to adjust variable operating expenses to reflect what they would have been if the building were fully occupied, typically at a defined threshold (85%, 90%, or 95%). This prevents tenants from subsidizing vacant space. BOMA 2024 defines the methodology for calculating gross-up adjustments in multi-tenant commercial buildings.
Base Year (CAM)
The base year is a reference year established in a lease against which future operating expenses are compared. In a base-year lease, tenants pay only the increase in operating expenses above the base year level. Base year drift — when the base year is applied inconsistently — is one of the most common sources of CAM billing errors.
CAM Cap
A CAM cap limits the annual increase in controllable operating expenses a landlord can pass through to tenants, expressed as a percentage of the prior year's charges. Caps may be cumulative (unused cap carries forward) or non-cumulative (unused cap is forfeited each year). Non-cumulative caps strongly favor landlords. Failing to apply caps correctly is a common dispute trigger.
Expense Stop
An expense stop is a dollar threshold above which tenants begin to share operating expenses. Unlike a base year, an expense stop is typically a fixed dollar amount per square foot. Below the stop, the landlord bears all operating costs. Above it, tenants pay their pro-rata share of the excess. Expense stops are common in gross and modified gross leases.
BOMA 2024
BOMA 2024 (ANSI/BOMA Z65.1-2024) is the current standard for measuring rentable area in commercial buildings, published by the Building Owners and Managers Association. It defines floor measurement methodology, gross-up calculation procedures, and common area allocation rules. Updated in 2024, it includes new provisions for outdoor tenant areas and amenity spaces.
Net Lease / NNN Lease
A net lease (or triple-net / NNN lease) requires tenants to pay base rent plus their proportionate share of three operating expense categories: property taxes, insurance, and common area maintenance. NNN leases shift operating cost risk from landlord to tenant and are standard in commercial retail, industrial, and office properties. CAM reconciliation is a defining feature of NNN lease administration.
Operating Expense Exclusions
Lease exclusions specify categories of expenses that tenants are not obligated to reimburse as part of CAM. Common exclusions include capital improvements, leasing commissions, management fees above a capped percentage, and expenses benefiting specific tenants. Including excluded expenses in CAM pools — intentionally or through miscoding — is the most frequently disputed billing error.
Controllable vs. Non-Controllable Expenses
Controllable expenses are operating costs the landlord can influence (management fees, janitorial, landscaping). Non-controllable expenses are outside the landlord's direct control (property taxes, insurance, utilities). CAM cap provisions typically apply only to controllable expenses. Misclassifying expenses between these categories can invalidate cap calculations.
SB 1103
California SB 1103, effective January 1, 2025, extends commercial tenant protections to small commercial tenants (qualified commercial tenants). It requires landlords to provide CAM reconciliation statements, itemized expense breakdowns, and supporting documentation upon request. Landlords who fail to comply face potential rent disputes and regulatory penalties.
Capital vs. Operating Expense (CAM context)
Capital expenses (CapEx) are improvements that extend asset life or add value — roof replacements, HVAC systems, parking lot reconstruction. Operating expenses (OpEx) are routine costs of building operation — janitorial, landscaping, lighting. Most NNN leases prohibit landlords from recovering capital expenditures through CAM. AI-assisted GL review can flag potential CapEx/OpEx misclassifications for human review.