An accounting method that records expenses when cash is actually paid and revenue when cash is received. Under cash basis accounting, a CAM reconciliation includes only expenses the landlord actually paid during the lease year, regardless of when the service was performed.
Cash basis accounting recognizes transactions when cash changes hands. For CAM reconciliation purposes, this means only vendor payments made during the reconciliation year are included in the expense pool. Services performed in December but paid in January would appear in the following year's reconciliation. Cash basis is simpler but can create timing distortions, especially at year-end boundaries. Some leases specify cash basis to give tenants clearer audit trails since every expense ties to a check or bank transaction.
A landlord using cash basis accounting delayed paying $45,000 in vendor invoices from year one into year two, reducing year one's CAM total. Then in year two, the landlord paid both year one's delayed invoices and year two's full expenses, creating an artificial $45,000 spike that pushed tenants over their controllable expense cap.
If your lease requires cash basis accounting, verify that the landlord is not shifting payment timing to manipulate which year expenses fall in. Compare invoice dates to payment dates. Consistent delays in year-end payments that suddenly appear the following year may indicate intentional expense shifting.
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Find My OverchargesThis page provides general educational information. It is not legal advice and may not reflect the most current law in your state. Consult a licensed attorney for advice specific to your situation.
