Commercial Lease Audit Checklist

A lease audit is one of the most effective ways for commercial tenants to verify that they are being billed correctly under their lease agreement. Whether you operate a retail store, medical practice, franchise location, or office space, conducting a periodic audit of your CAM charges and operating expense pass-throughs can uncover billing errors that quietly accumulate over time.

This checklist provides a structured framework for reviewing your lease charges. You don't need a background in commercial real estate to follow it, each item is explained in plain language so that any business operator can use it.

Before You Start: Gather Your Documents

Before you begin the audit, collect the following documents. Having everything in one place will make the process significantly faster:

• Your executed lease agreement: including all amendments, addenda, and side letters.
• CAM reconciliation statements: for the current year and at least the prior two years. See our guide on CAM reconciliation for background on what these statements contain.
• Monthly rent and CAM invoices: to compare estimated charges against actual reconciliation amounts.
• Prior audit reports: if you have conducted audits in previous years.

Step 1: Verify Your Lease Terms

Start by confirming the fundamental terms of your lease that affect how charges are calculated:

• Lease type: Is your lease a triple net (NNN), modified gross, or full-service gross lease? This determines which expenses you are responsible for.
• Premises square footage: Confirm the rentable square footage stated in your lease matches what is used in the reconciliation calculations.
• Proportionate share: Verify the percentage used for your share of common area expenses. This is typically your square footage divided by total leasable area.
• Base year or expense stop: If applicable, confirm the base year amounts being used in your calculations.
• Lease commencement and expiration dates: Ensure charges are only billed for periods your lease is active.

Step 2: Review the CAM Reconciliation Statement

The annual CAM reconciliation statement is the core document you are auditing. Review it with the following questions in mind:

• Are all expense categories consistent with what your lease allows to be passed through?
• Are there any new line items that did not appear in prior years? If so, are they permitted under your lease?
• Do any individual expense categories show large year-over-year increases? Spikes may indicate common overcharges such as capital expenses being classified as operating costs.
• Is the management fee calculated at the correct percentage as specified in your lease?
• Does the statement reflect the correct proportionate share for your space?

Step 3: Check for Excluded Expenses

Your lease may include a list of expenses that the landlord cannot pass through to tenants. If it does, review that exclusion list and confirm that none of these costs appear on your reconciliation:

• Capital expenditures (unless your lease specifically permits them or requires amortization)
• Leasing commissions or tenant improvement costs
• Costs reimbursed by insurance proceeds or warranties
• Marketing, advertising, or promotional expenses
• Legal fees for lease disputes or tenant negotiations
• Mortgage payments, debt service, or ground rent
• Costs attributable to the landlord's own space or vacant space
• Depreciation or amortization of the building itself

Step 4: Validate the Proportionate Share Calculation

Your proportionate share is the single most impactful number on your reconciliation because it affects every expense line item. Verify:

• Your square footage matches the lease, not an estimate, not a rounded number.
• The total building or project area used in the denominator is correct and hasn't changed without lease authorization.
• Gross-up provisions, if your lease has one, are applied as written: the specified occupancy level and only eligible variable expenses. A missing or different adjustment is not automatically an overcharge.

Step 5: Review CAM Cap Compliance

If your lease includes a CAM cap, verify that it is being applied correctly:

• Is the correct base year amount being used?
• Is the cap applied as cumulative or non-cumulative, as your lease specifies?
• Are controllable and uncontrollable expenses separated correctly?
• Does the year-over-year increase stay within the cap percentage?

Step 6: Compare Estimates to Actuals

Compare the monthly CAM estimates you paid during the year against the actual reconciliation amount. Look for:

• Large true-up charges that suggest estimates were significantly too low
• Patterns of consistently high estimates that result in credits owed back to you: are those credits actually being applied?
• Whether the landlord is adjusting estimates each year to reflect prior actuals

Step 7: Exercise Your Audit Rights

Your lease may include audit rights that allow tenants to inspect the landlord's books and records. If it does, and your review reveals discrepancies:

1. Send a written request to the landlord or property manager, referencing the specific lease provision that grants audit rights.
2. Request supporting documentation: invoices, contracts, and vendor agreements for any charges you want to verify.
3. Note the deadline. Many leases set a time limit for requesting an audit after you receive the reconciliation. Check the limit in your lease. Missing this window may waive your rights for that year.

For a detailed walkthrough of the audit process, see our step-by-step CAM audit guide.

How LeaseGuard Helps

LeaseGuard automates the most time-consuming parts of this checklist. By uploading your lease agreement and CAM reconciliation statement, the platform cross-references the two documents to flag potential issues: statement lines that may fall under a lease exclusion or look like capital items, a proportionate share or management fee percentage that differs from the lease, and, when prior-year figures are available, a year-over-year change above a cap. These are items to investigate, not conclusions about what your lease allows, so you do not have to review every line from scratch.

Key Takeaways

• Gather your lease, amendments, and at least two years of reconciliation statements before starting
• Verify your proportionate share first: errors there affect every expense category
• Cross-reference reconciliation line items against your lease's exclusion list
• Check CAM cap compliance if your lease includes annual increase limits
• Exercise your audit rights within the deadline specified in your lease