Why Treating CAM Reconciliation as Back-Office Work Puts NOI at Risk

Common Area Maintenance reconciliation, often referred to as CAM reconciliation, is one of the most financially consequential processes in commercial real estate. Yet in many organizations, it is still treated as back-office work. Administrative. Accounting-driven. Routine.

That framing creates risk.

For properties operating under Triple Net Lease or NNN structures, CAM reconciliation and operating expense recoveries are not peripheral tasks. They directly affect net operating income, tenant relationships, and asset value.

When these functions are treated as clerical rather than strategic, owners absorb financial consequences they rarely see until years later or at disposition.

CAM Reconciliation Is an Interpretive Process, Not Just Math

At its core, CAM reconciliation is not simply the allocation of operating expenses. It is a series of interpretive decisions governed by lease language.

Those decisions include:

• How lease provisions are interpreted and applied

• Which operating expenses are considered recoverable

• How exclusions are defined and documented

• How consistently methodology is applied across tenants and years

While accounting ensures numerical accuracy, CAM reconciliation requires lease fluency and judgment. Two professionals can reconcile the same property using the same financial data and arrive at materially different results depending on how the lease is interpreted.

This is where most value is either protected or lost.

Why CAM Reconciliation Often Falls Outside Governance

In many organizations, CAM reconciliation exists between disciplines.

Accounting focuses on expense classification and totals.

Property management focuses on execution and tenant communication.

Asset management reviews aggregate results.

What is often missing is formal oversight of interpretation.

When no clear standard exists for how CAM decisions should be made, documented, and reviewed, reasonable assumptions quietly become policy. Conservative exclusions become precedent. Informal decisions made to resolve one situation carry forward indefinitely.

These outcomes are rarely the result of error or negligence. They are the result of structure.

A Common Example: Management and Administrative Fees

Consider a typical Triple Net Lease (NNN) provision allowing recovery of management or administrative fees, often capped at a percentage of total CAM expenses.

When CAM totals $190,000 and the lease allows a management fee of up to five percent, the allowable recovery is $9,500. If a tenant’s Pro Rata Share is 30 percent, the recoverable amount under that lease is $2,850 annually.

When that fee is excluded out of caution or uncertainty, the owner absorbs $2,850 each year for that lease alone. Over a five-year period, that is $14,250 in unrecovered operating expense, despite clear lease authority.

At sale, assuming a conservative seven percent cap rate, that single decision reduces asset value by approximately $40,000.

This is not an aggressive billing scenario. It is an example of how overly restrictive interpretation quietly impacts NOI and valuation.

How These Decisions Compound Over Time

Most CAM reconciliation risk does not appear as a one-time loss. It compounds.

Once an expense is excluded without a lease-based rationale, reintroducing it later becomes difficult. Tenants adjust expectations. Teams normalize the exclusion. Documentation fades.

Across multiple leases, multiple operating expense categories, and multiple years, these small decisions reshape the financial profile of an asset.

Owners often discover this only when:

• Recoveries decline without clear explanation

• Disputes increase during ownership transition

• Buyers scrutinize operating expense recoveries at disposition

By then, the baseline has already shifted.

Why This Matters for Triple Net Lease (NNN) Assets

Triple Net Lease structures are designed to shift operating expense responsibility to tenants. That structure only works when CAM reconciliation is executed with precision and consistency.

When operating expenses are under-recovered due to interpretation gaps, owners subsidize costs tenants contractually agreed to pay. Over time, this undermines the financial integrity of the lease structure itself.

CAM reconciliation is therefore not an administrative task. It is a financial control function.

Reframing CAM Reconciliation as Financial Stewardship

CAM reconciliation should be governed with the same rigor applied to leasing, budgeting, and capital planning.

That includes:

• Clear interpretation standards

• Consistent methodology across assets

• Documentation of assumptions and decisions

• Alignment with lease intent rather than habit

This is not about maximizing charges or minimizing disputes. It is about accuracy.

When CAM reconciliation is treated as routine, the asset absorbs the risk.

When it is treated as a financial discipline, the asset is protected.

Final Thought for Owners and Professionals

Whether you own commercial real estate, manage assets, or oversee property operations, CAM reconciliation deserves closer attention than it traditionally receives.

The most significant CAM risks are not found in spreadsheets. They are found in how decisions are made, applied, and carried forward.

That distinction is where NOI is either preserved or quietly surrendered.

Lisa Shull, CPM

Author, The NOI Lens