Common area maintenance, otherwise known as CAM charges, is one of the most significant challenges landlords face with their tenants. Without a proper understanding of who pays for what, the landlord-tenant relationship can become complicated, with disagreements from tenants disputing CAM charges.
As a property owner, you would prefer your tenants to enjoy their stay and extend their leases, which translates to stable income for you. CAM charges can interfere with your income stability as you can lose money if you agree to take on all the CAM charges. However, you must also approach disputes delicately to avoid a tenant breaking their lease and leaving you with lost rent. CAM reconciliation is the goal for any landlord or property owner.
Today, we’ll help you minimize these risks by looking at what you can do when your tenants dispute CAM charges.
#1: Revisit the Lease Agreement With the Tenants
A lease agreement helps to address the concerns tenants raise when disputing CAM charges. Tenants usually overlook some sections of the lease, and they assume all they have to pay is the base rent. They sometimes don’t see where they must pay CAM charges and then become upset when property owners try to collect. Remember to remind them of the sections in the lease that defines what they agreed to pay.
If your tenant is surprised by a clause in the lease, you’ll need to break down further the expenses they agreed to pay depending on the lease type. The two main expenses you must navigate are:
- Controllable expenses include taxes and insurance, which you can predict month after month.
- Uncountable expenses include operating expenses, repairs, and maintenance and can vary depending on how often tenants require these services.
Tenants primarily dispute CAM charges on the uncontrollable expenses because they either don’t want to pay for them or the charges surpass their expectations.
Expert Tip: Before a prospective tenant signs the lease agreement, make it clear that the CAM charges are billed separately from the base rent, which helps to minimize uncomfortable discussions later.
#2: Explain The Two CAM Charges Caps
Sometimes tenants may assume the CAM charges they pay yearly will remain constant. While that is partly true, depending on the CAM cap they signed, they may not be aware that both CAM caps leave room for an increase in CAM charges. As a property owner, there are two types of caps that you may need to explain to your tenants:
- Cumulative Cap: This cap favors property owners as it gives them the flexibility to improve their property without significantly affecting their income base. The tenant pays for the agreed CAM charges plus any extra amount that surpasses the cumulative cap.
- Non-cumulative cap: This cap favors tenants because it allows them to have a predictable budget and avoid unexpected changes in CAM charges. This agreement limits the annual CAM charges, and the property owners cover any amount beyond that.
#3: Discuss CAM Reconciliation Figures with the Tenants
Bringing your tenants up to speed with CAM reconciliation calculation can be a daunting but necessary task if they’re constantly disputing CAM charges. Help them see that it’s almost impossible to predict the uncontrollable expenses to the dollar. That’s why you need to estimate the annual charges and calculate the exact amount at the end of the year.
Most tenants won’t have any problem when they’re the ones receiving money back for over-estimated CAM charges, but they’ll raise concerns when they’re to add more money than they had budgeted to pay. Some tenants may also dispute paying because their charges are more than for other tenants. You’ll need to explain that you calculate by using the proportionate share of the unit space, which is based on square footage.
Expert Tip: Landlords should estimate the CAM charges as accurately as possible using Property Management Software to reduce the likelihood of disputes due to exorbitant figures tenants need to pay back.
#4: Use CAM Accounting Software
Trying to keep all the operating expenses in check, even with hardworking employees, can be overwhelming. You can reduce tenant CAM charges disputes by using a CAM Accounting Software that helps to:
- Bill common area charges
- Maintain chart of accounts
- Track leases and rent escalations
- Create an annual budget
UnitConnect’s property management software has these and other magnificent features. It also has a tenant log-in section where your tenants can see their bills broken down and easily project their charges.
Schedule a demo today and see how you can manage CAM charges efficiently and minimize tenant disputes.
