Gross-Up Violation: How CAMAudit Detects This Calculation Error
If your building had vacancies and your landlord failed to gross up variable expenses as your lease requires, the missing adjustment can inflate each occupied tenant's share by 15% or more of the variable expense pool.
How CAMAudit Detects This
CAMAudit extracts the gross-up provision from your lease, including the occupancy threshold (commonly 95%), the categories of expenses subject to gross-up, and the formula for normalization. Not all leases have gross-up provisions; CAMAudit notes when one is absent.
For leases with gross-up provisions, CAMAudit checks the occupancy level during the reconciliation period against the threshold. If occupancy was below the threshold, gross-up should have been applied to variable expenses. The tool reviews whether the reconciliation statement includes gross-up adjustments and flags the discrepancy when they are missing.
CAMAudit notes in the finding report which variable expense categories were affected and estimates the scale of the missing adjustment based on the occupancy gap. This finding is typically the basis for a formal audit request, since the landlord's internal cost allocation data is needed to calculate the precise dollar impact.
Real-World Example
A tenant's lease required gross-up of variable expenses to 95% occupancy when actual occupancy fell below that level. During the audit year, the building was 78% occupied. Total variable expenses (janitorial, common area utilities, HVAC) were $84,000. Without gross-up, each tenant paid based on 78% occupancy. Grossed up to 95%, the pool should have been normalized to $102,308 before allocation ($84,000 divided by 0.78, multiplied by 0.95). The landlord allocated $84,000 without adjustment. CAMAudit flagged the missing gross-up on $84,000 in variable expenses and noted that the formal audit would determine each tenant's specific overcharge based on the internal cost split.
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