GL Coding Guide for CAM Recoverable Expenses
GL code is the first and last line of defense in a CAM dispute. One wrong account code turns a routine invoice into a multi-year liability.
How to Use This Guide
Three sections: Clearly Recoverable (6000-series), Non-Recoverable Capital (1000/7000-series), and Gray-Area with decision rules. The governing standard cited for each row is the fastest path to audit defense. When in doubt, default to non-recoverable — the burden of proof sits with the landlord.
1. Clearly Recoverable Operating Expenses
These expenses pass through to tenants under a standard NNN lease. They survive the IRS §162 / BOMA EER test because they keep the property in its ordinary operating condition without extending its designed useful life.
| GL Code | Expense Category | Typical Examples | Governing Standard |
|---|---|---|---|
| 6110 | R&M: Roof | Patching, flashing repair, gutter clearing | IRS §162 routine maintenance |
| 6120 | R&M: HVAC | Annual PM contracts, coil cleaning, single RTU in multi-unit system | IRS Routine Maintenance Safe Harbor (UOP doctrine: one of several units) |
| 6130 | R&M: Parking Lot | Sealcoating, restriping, pothole fill, crack seal | IRS §162 |
| 6140 | Landscaping | Mowing, weeds, seasonal annuals, mulch, irrigation PM | Industry standard / BOMA EER |
| 6150 | Security Services | Guard wages, monthly monitoring, alarm response fees | BOMA EER |
| 6510 | Real Estate Taxes | Municipal property taxes, special assessments | NNN lease standard; uncontrollable |
| 6520 | Property Insurance | Hazard, fire, liability premiums | NNN lease standard; uncontrollable |
| 6530 | Common Area Utilities | Lobby/lot electricity, water, gas | NNN lease standard; uncontrollable |
| 6810 | Amortized Cost-Saving CapEx | Annual fraction of LED retrofit or efficient HVAC replacement | BOMA exception: cost-saving capital, amortized over useful life |
Note: Items 6100–6150 are controllable and typically subject to tenant-negotiated annual caps (3–5%). Items 6500–6530 are uncontrollable and pass through uncapped. Never commingle these in the same parent account.
2. Clearly Non-Recoverable Capital Expenses
These must post to 1000-series asset accounts or 7000-series non-recoverable accounts. Under IRS §263(a), they represent a Betterment, Restoration, or Adaptation (BRA) to the Unit of Property — which means they are capitalized, not expensed.
| GL Code | Expense Category | Typical Examples | Why It's Capital |
|---|---|---|---|
| 1510 | Roof & Structural Replacements | Full tear-off, new membrane, structural overhaul | IRS §263(a): Restoration of major building component |
| 1520 | HVAC Capital | Sole-chiller replacement, complete ductwork overhaul, all RTUs replaced simultaneously | IRS §263(a): Restoration of HVAC UOP |
| 1530 | Land & Parking Improvements | Mill-and-overlay, full-depth repave, new parking structure | IRS §263(a): Betterment/Restoration; RioCan precedent |
| 1540 | Security Hardware | CCTV network, biometric turnstiles, access control wiring | Long-term fixed asset (MACRS 7 yr); not a service |
| 1550 | Major Landscape Redesign | New irrigation system, mature trees, retaining walls, hardscape | Adaptation to new use (IRS BRA test) |
| 7110 | Leasing Commissions | Broker fees, TI allowances, marketing | Landlord cost; no operating benefit to tenants |
| 7120 | Software Subscriptions | Yardi/MRI SaaS, corporate IT | Admin overhead unless lease explicitly permits |
| 7130 | Off-Site Management Payroll | Executive salaries, corporate accounting staff | Landlord overhead; double-dip risk with admin fee |
Rule: These must never land in a 6000-series recoverable pool. If they appear there, they are a misclassification — the most common finding in contested CAM audits.
3. Gray-Area Expenses
Classification depends on the scope of work and the IRS Unit of Property (UOP) doctrine. The same category of work can be operating or capital depending on magnitude and intent.
| Expense | Recoverable If… | Non-Recoverable If… | Default GL Code |
|---|---|---|---|
| Roof work | 6110 if localized repair — patching, flashing, gutter clear | 1510 if full membrane replacement or structural scope | 6110 / 1510 |
| HVAC work | 6120 if single component in multi-unit system; routine PM | 1520 if only chiller replaced or all units replaced simultaneously | 6120 / 1520 |
| Parking lot | 6130 if sealcoat, restripe, potholes, crack seal | 1530 if mill-and-overlay or sub-base excavation | 6130 / 1530 |
| Landscaping | 6140 if routine mowing, planting, mulch, irrigation PM | 1550 if new irrigation system, hardscape redesign, or mature trees installed | 6140 / 1550 |
| Security | 6150 if monthly monitoring contracts or guard wages | 1540 if initial hardware purchase and installation | 6150 / 1540 |
| PropTech / SaaS | 6530 variant if lease explicitly lists "technology infrastructure" | 7120 if no explicit lease language — default non-recoverable | 7120 |
| Admin overhead | 6140–6150 range for on-site maintenance/engineer wages, direct mgmt fee (3–5%) | 7130 if charging admin fee AND exec salaries simultaneously (double-dip) | 6140–7130 |
Default rule: When in doubt, classify as non-recoverable. In a contested audit the burden of proof sits with the landlord, not the tenant.
How Miscoding Snowballs
Prevention: A clean chart of accounts — strict 1000/6000/7000 separation with no exceptions at invoice entry — eliminates all downstream compounding. The cost of one minute of correct GL coding at posting time is zero. The cost of correcting it in Year 5 of litigation is not.
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