CRE 101 · deweyluong.realtor

CAM Reconciliation and Percentage Rent Explained: How Retail Leases in Georgia Really True Up

The estimate is not the bill. By Túy “Dewey” Luong, CCIM — Founding Broker, SERHANT. Atlanta · 318 closed sales / $281.2M career volume · 678-707-2498

Two retail lease clauses surprise Georgia tenants more than any others: the annual CAM reconciliation, which can arrive as one large true-up bill in the spring, and percentage rent, which only appears after sales pass a breakpoint many tenants never modeled. Both are defined entirely by the lease. Neither is implied by law.

This page explains how the reconciliation math works, what to check line by line, and how percentage rent breakpoints are built — for tenants signing, landlords billing, and investors buying a center whose income depends on both. Start with NNN leases for the structure these charges sit inside.

How CAM is billed, then reconciled

• Pro-rata share: your rentable square feet divided by the center's denominator, as the lease defines it. A 2,500 SF tenant in a 40,000 SF center is 6.25% on a total-rentable denominator.
• The pool: only recoverable costs belong in it. Exclusions, caps, and capital treatment decide whether the pool is fair — see the checklist below.
• Gross-up: when a center is partly vacant, variable costs (janitorial, landscaping, parking) are often grossed up as if occupancy were higher, so the tenants who are there do not carry the whole variable bill. Whether and how gross-up applies is a lease term.
• Timing: reconciliations usually arrive in the first half of the following year. The lease sets the delivery deadline and how long the tenant has to object or audit — a missed window can close a valid claim.

Worked example. The numbers below are made up to teach the mechanics. This is not a real property.

• Retail space in Gwinnett: 2,500 SF in a 40,000 SF center — pro-rata share 6.25%
• Budgeted recoverable pool: $320,000 ($8.00 / SF) — estimated CAM paid during the year: 6.25% × $320,000 = $20,000
• Actual recoverable pool at year-end: $352,000 — true share: 6.25% × $352,000 = $22,000
• Reconciliation result: tenant owes $2,000. If actual had been $300,000, the true share would be $18,750 and the tenant would be due a $1,250 credit.
• Cap check: if $200,000 of the pool is controllable and the lease caps controllable increases at 4%, a 12% jump in controllable costs does not pass through in full — the cap holds that portion to a 4% increase while uncontrollable taxes and insurance pass through as the lease allows.

Read the example the way an auditor would: the fight is rarely over the arithmetic. It is over what was allowed into the pool, which denominator was used, and whether the cap was applied.

The reconciliation checklist — check these in order

• Share and denominator: does the percentage on the statement match the lease, using the current amended terms — not the original lease if a renewal changed it?
• Exclusions: leasing commissions, tenant-improvement allowances, landlord marketing, and capital reserves are commonly excluded. If they are in the pool, ask why.
• Capital items: a roof replacement or parking-lot rebuild is usually a capital cost to be amortized over its useful life, not expensed in one year into CAM.
• Caps: is the cap cumulative or non-cumulative, and does it apply only to controllable expenses? Apply it exactly as written.
• Management / administrative fee: what percentage, on what base, and is it capped? This line is often overlooked.
• Audit rights and deadlines: how long do you have to request records, who may audit, and does the landlord pay the audit cost if an overcharge above a set threshold (often 3–5%) is found?

Percentage rent, without the mystery

Percentage rent is extra rent on sales, not on space. A common retail structure: base rent plus, say, 6% of gross sales above a breakpoint.

• Natural breakpoint: annual base rent divided by the percentage rate. If base rent is $120,000 and the rate is 6%, the natural breakpoint is $2,000,000 in sales — percentage rent is owed only on sales above $2,000,000.
• Artificial breakpoint: a negotiated fixed sales number, higher or lower than natural. Know which one your lease uses before you forecast.
• Gross sales definition: what counts, what is excluded (online orders picked up in store, gift cards, employee sales), how sales are reported, and the landlord's audit right — these clauses decide whether the number is clean.
• For investors: percentage rent is upside, not base income. Underwrite it separately from cap rate and NOI on base rent, and check the sales history before valuing it.

Percentage rent and CAM meet in one place: total occupancy cost. A tenant can win a low base rent and lose on CAM pass-throughs plus percentage rent in a strong sales year. Model all three together — the same discipline as lease vs buy and DSCR underwriting.

Cho chủ doanh nghiệp và nhà đầu tư người Việt

CAM reconciliation là bản quyết toán cuối năm: người thuê trả tạm ứng hàng tháng theo tỷ lệ diện tích, sau đó chủ nhà đối chiếu với chi phí thực tế — thiếu thì trả thêm, thừa thì được trừ. Trước khi ký hợp đồng thuê bán lẻ tại Georgia, cần kiểm tra rõ: tỷ lệ pro-rata và cách tính mẫu số diện tích, các khoản chi phí bị loại trừ, giới hạn tăng phí CAM controllable, chi phí vốn có được tính thẳng vào CAM hay phải khấu hao, phí quản lý, và quyền kiểm tra sổ sách cùng thời hạn phản đối.

Percentage rent là tiền thuê phụ trội tính trên doanh số bán vượt mức breakpoint đã thỏa thuận. Cần hiểu rõ breakpoint là natural hay artificial, định nghĩa gross sales gồm những gì, và cách báo cáo doanh số. Đây là thông tin giáo dục chung, không phải tư vấn pháp lý — hãy trao đổi với luật sư của bạn trước khi ký.

Frequently asked questions

What is a CAM reconciliation?

A CAM reconciliation is the landlord's annual true-up of common-area maintenance charges. During the year the tenant pays a monthly estimate of its pro-rata share of taxes, insurance, and CAM. After year-end the landlord compares those estimates to actual costs, and the tenant either owes the shortfall or receives a credit. The statement should show the actual expense pool, the tenant's pro-rata share, and the amount already paid.

How is a tenant's CAM share calculated?

Usually as a pro-rata share: the tenant's rentable square feet divided by the building or center's rentable square feet, multiplied by the recoverable expense pool. Two definitions drive the bill — what counts in the pool (exclusions, caps, capital items) and what denominator is used (total rentable area, leased area, or a grossed-up figure when the center is partly vacant). Both are defined by the lease, not by custom.

What should a tenant check on a reconciliation statement?

Check the pro-rata percentage and denominator against the lease, whether capital items were expensed instead of amortized, whether excluded costs (landlord leasing commissions, tenant-improvement costs, capital reserves) entered the pool, whether any cap on controllable expenses was applied correctly, whether variable costs were grossed up fairly, the management or administrative fee, and the deadline to object or audit. Most disputes trace to one of those items being applied differently from the lease.

What is percentage rent in a retail lease?

Percentage rent is additional rent a retail tenant pays when gross sales pass an agreed breakpoint. Rent is typically a percentage of sales above the breakpoint — for example 6% of sales over a natural breakpoint. The lease defines what counts as gross sales, what is excluded, reporting and audit rights, and whether the breakpoint is natural (base rent divided by the percentage) or artificial (a negotiated fixed sales figure). Percentage rent aligns landlord and tenant only when the sales definition and reporting are clear.

Phí CAM reconciliation là gì và người thuê cần kiểm tra gì?

CAM reconciliation là bản quyết toán hàng năm của chủ nhà: trong năm người thuê trả tạm ứng hàng tháng theo tỷ lệ diện tích; cuối năm chủ nhà so sánh với chi phí thực tế và người thuê trả thêm phần thiếu hoặc được trừ phần thừa. Người thuê cần kiểm tra tỷ lệ pro-rata và mẫu số diện tích, các khoản bị loại trừ, giới hạn tăng phí controllable, chi phí vốn có bị tính thẳng thay vì khấu hao hay không, phí quản lý, và thời hạn phản đối hoặc kiểm tra sổ sách ghi trong hợp đồng.

This page is general education, not legal, tax, or accounting advice. Lease terms vary by document and situation — confirm your lease with your attorney and CPA before you sign or buy. Túy “Dewey” Luong, CCIM is a real estate broker, not an attorney.