Real Estate Accounting
Real Estate Accounting for Commercial Tenants and Property Owners
The principal service is CAM and lease compliance review. Each annual reconciliation is compared against the governing lease terms, and every charge the lease does not support is documented.
Who This Serves
Commercial tenants in office, medical office, retail, and multi-tenant industrial properties, as well as private real estate owners and investors who require accounting support for their holdings.
CAM and Lease Compliance Review
The review examines the annual common area maintenance (CAM) and operating expense reconciliation against the lease and identifies charges the lease does not permit. Common findings include management fees calculated on an incorrect base, a misstated pro rata share, unapplied expense caps, improper gross-up, base year errors, and capital expenditures billed as operating expenses.
Each finding is presented in writing with the governing lease provision and a supporting schedule, suitable for submission to the landlord.
Areas of Examination
Overcharges
Charges exceeding what the lease permits in amount, category, or billing period.
Pro Rata Share Errors
Misstatements of the tenant's share, including those arising from changes in building rentable area or tenant mix.
Base Year Issues
Whether the base year was properly established, and whether expenses included in the base year have been billed again.
Expense Cap Violations
Caps on controllable or total operating expenses, including compounding and carryover provisions where the lease provides for them.
Gross-Up Errors
Whether variable expenses were grossed up to full occupancy using the method the lease requires.
Capital Costs Billed as Operating Expenses
Capital repairs, replacements, and improvements passed through or amortized contrary to the lease.
This service is commonly referred to as a CAM audit. Engagement letters describe it as a CAM and lease compliance review.
Additional Real Estate Accounting Services
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Lease Abstraction
A written summary of the provisions governing rent and additional charges, prepared for ready reference.
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Base Year and Expense Stop Review
An examination of how the base year or expense stop was established and what it permits the landlord to recover.
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Operating Expense Budget Review
A review of the landlord's proposed budget before it sets monthly estimated payments.
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Pre-Deadline Reconciliation Review
A review of a newly received statement while the lease objection period remains open.
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ASC 842 Lease Accounting
Lease classification, measurement, and supporting schedules.
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Rental Property Bookkeeping and Reporting
Monthly records, income and expense tracking, and property-level financial statements.
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Real Estate Transaction Support
Cost basis tracking and review of closing statements for acquisitions and dispositions.
Engagement Process
- 01
Document Submission
The client provides the lease, all amendments, and the most recent reconciliation or CAM statement.
- 02
Initial Review
The governing provisions are reviewed and the scope of the engagement is confirmed in writing.
- 03
Written Findings
Each finding is delivered in writing with the applicable lease provision and supporting schedule.
- 04
Resolution Support
Christopher Larsen CPA addresses questions on the findings and supports discussions with the landlord or its accountants.
Documents Required
The following documents are needed to confirm the scope of the review.
- The lease and all amendments, particularly the operating expense and CAM provisions.
- The most recent reconciliation or CAM statement.
- Supporting expense schedules and detail, if available.
- The property address and rentable square footage of the premises.
Fees are agreed in writing at the outset of each engagement.
Frequently Asked Questions
What Is a CAM Audit?
A CAM audit is the common term for a review of the common area maintenance and operating expenses a landlord has billed to a commercial tenant, measured against the terms of the lease. The result is a written record of which charges the lease supports and which it does not.
What Does the Review Cover?
Overcharges, pro rata share errors, base year issues, unapplied expense caps, gross-up errors, and capital costs billed as operating expenses. Each finding is tied to a lease provision and a supporting schedule.
Who Performs the Work?
Every review is performed personally by Christopher D. Larsen, CPA. The client's point of contact is the accountant conducting the review.
What Is Needed to Begin?
The lease and all amendments, the most recent reconciliation or CAM statement, and supporting expense schedules. For ASC 842 engagements, the lease file and current accounting schedules are generally sufficient to establish scope.
Request a Review
Submit the lease and the most recent reconciliation, and Christopher Larsen CPA will advise whether a review is warranted.