CAM Estimate vs. CAM Reconciliation: What's the Difference?

Sources: Tango Analytics, J.P. Morgan commercial real estate research.

Most lease disputes begin not with the reconciliation itself, but with the gap between what tenants expected to pay and what the year-end statement demands. Understanding how estimates are set, and how the reconciliation corrects them, removes a lot of that friction before it becomes a formal dispute.

For background on what CAM reconciliation is and how the process works, that guide covers the full cycle from lease language to settlement.

How CAM Estimates Are Set

Landlords typically set estimates 30 to 60 days before the new lease year begins, which aligns with IREM guidance on budget timelines. The process is straightforward in concept: take last year's actual expenses from the general ledger, apply relevant inflation indices (CPI for labor-heavy line items, local utility rate changes for energy), and layer in any anticipated vendor contract changes for the coming year.

The result is a monthly dollar figure per tenant, calculated as their pro-rata share of the projected total pool. That figure is written into an annual reconciliation budget and billed monthly, usually as a line item alongside base rent.

Best practice calls for reviewing estimates against the actual run rate at mid-year. If expenses are tracking well above or below projection, landlords can issue a revised estimate rather than letting the divergence compound. Most leases permit this; few landlords do it proactively.

How Reconciliation Corrects the Estimate

Once the year closes, the landlord compiles actual expenses from the GL, applies any lease-required adjustments (gross-up for occupancy, cap calculations, exclusions), and arrives at the adjusted expense pool. The formula from IREM Oregon is direct:

Adjusted Pool x Pro-Rata Share - Estimated Billings Collected = Net Due

A positive result means the tenant underpaid relative to actual expenses. The landlord issues a true-up bill. A negative result means the tenant overpaid; the landlord issues a credit, typically applied to the next month's rent or refunded directly depending on lease terms.

For a checklist of what to review before sending that statement, see the CAM pre-send checklist. For the most common calculation errors that distort the reconciliation result, CAM reconciliation errors covers the high-frequency failure modes.

What Happens When Estimates Are Badly Wrong

The pattern accelerates in inflationary environments. Insurance premiums rise mid-contract. Landscaping and snow removal vendors reprice. Utility rates change quarterly. Landlords who lock in an estimate at January and never revisit it absorb none of that in monthly billing; all of it lands in the year-end true-up.

Why This Matters to Landlords, Not Just Tenants

The framing of estimate-versus-reconciliation often centers on tenant exposure, but the landlord's position matters too.

Systematically low estimates mean the landlord is financing tenant operations interest-free across the lease year. Actual expenses are incurred and paid by the landlord, but reimbursement doesn't arrive until reconciliation settlement, which can be 90 to 120 days after year-end. On a large portfolio, this timing gap is real working capital sitting on the table.

Systematically high estimates create the opposite problem. Tenants who overpay throughout the year are owed credits at reconciliation. Beyond that, chronic overestimation is a direct path to overbilling exposure. In jurisdictions with commercial lease transparency statutes, including California SB 1103 protections for smaller tenants, overcharges carry legal risk beyond the credit itself. For a full treatment of that exposure, see CAM overbilling liability.

Annual estimate reviews tied to actual mid-year spend fix this. It's not a complex process. It's a discipline problem, and one that software can enforce by flagging projected-versus-actual variance before it compounds into a year-end dispute.