CAM reconciliation sounds like a once-a-year formality — sum up the shared expenses, bill the tenants their share, done. In practice, it's one of the easiest things to get wrong in commercial real estate accounting, and the errors are exactly the kind tenants notice and push back on.
Start with the pool, not the invoice
Before any allocation happens, the CAM pool itself has to be right: which expenses are includable under each lease, which are excluded (capital improvements are the classic example), and which fall into a gray area that depends on specific lease language. Pooling this incorrectly means every downstream number is wrong, no matter how precise the math looks afterward.
Base years quietly shift the whole calculation
For leases with a base year, the tenant only pays their share of increases over that base — which means the base year figure has to be locked correctly and never silently drift as new expenses get added in later years. A base year that's wrong by even a small amount compounds every year after it.
Expense caps aren't optional math
Many leases cap annual increases in controllable expenses, often on a cumulative or compounding basis. Applying a simple flat cap instead of the lease's actual cumulative formula is one of the most common reconciliation errors — and it's the kind of mistake a sharp tenant's accountant will catch immediately.
Reconcile to actuals, not to budget
The annual reconciliation has to true up estimated payments against what was actually spent — not against what was budgeted. Treating budget as if it were actual is a shortcut that eventually produces a reconciliation that doesn't match the general ledger.
The takeaway
A CAM reconciliation is really four separate calculations — pool definition, base year application, cap application, and true-up to actuals — done in the right order, per lease. Skipping straight to "total expenses divided by square footage" is how disputes start.