Percentage rent collection is a twelve-month cycle with one certified settlement at the end. Each month the tenant reports gross sales, the landlord computes provisional percentage rent on a cumulative basis and bills it, and after the lease year closes the tenant delivers a certified annual statement against which the landlord issues a true-up invoice or credit. The maths is one line, (gross sales − breakpoint) × rate, and it's covered in our percentage rent calculation guide. This post is about running the cycle so that the invoices are right, on time, and defensible. The cycle at a glance When What happens Who acts Output Lease abstraction Rate, breakpoint type, tiers, gross-sales flags, reporting deadlines and audit terms captured on the lease record Lease admin Lease record ready to bill Monthly, by the 15th Tenant submits the prior month's gross sales statement, signed by an officer Tenant Sales figure entered against the lease Monthly, on receipt Cumulative year-to-date sales ...

A RUBS calculation (ratio utility billing system) divides a property's master-metered utility bill among residents by formula rather than by meter. The ratio utility billing formula is: (master bill − common-area deduction) × resident's allocation factor ÷ sum of all allocation factors. The factor can be the unit, the occupants, the square footage, or a blend, and that choice moves a resident's bill by up to 50%. Here is what that looks like on one bill. One $14,000 bill, one resident, four different amounts The building: 120 units, 96,000 rentable square feet, 240 residents on leases. This month's master water and sewer bill is $14,000. After a 10% common-area deduction (explained below), $12,600 is allocable. The resident: a two-bedroom unit, 1,000 sf, three people on the lease. Method Calculation This resident pays vs. per-unit Per unit $12,600 ÷ 120 $105.00 — RUBS by square footage $12,600 × 1,000 ÷ 96,000 $131.25 +25% Hybrid, 50% occupants / 50% sf ($157.50 + $131.25) ÷ 2 $144.38 ...

A distribution run is the batch process that pays every owner in a portfolio for a closed period. It happens after the statements are produced, it draws on a balance that has already been calculated, and it should be the least interesting part of the month. For most operators it is not, because the run is assembled by hand: a list pulled from one system, payment details from another, a bank file built in a spreadsheet, and someone checking it twice because a mistake here moves real money to the wrong place. This is the operational half of owner reporting. The terminology question of what to call the payment is separate and worth getting right, but it does not change the mechanics below. Frequency Three patterns are common, and the choice is usually set by the management agreement and operating policy. Monthly is common for residential portfolios. Rent arrives monthly, owners often expect regular income, and the shorter cycle limits the amount held between runs. Quarterly is also used ...

For a property manager, the monthly payment to an owner is generally a disbursement. "Draw" and "distribution" describe what the owner may do with those funds after they reach the owning entity, depending on that entity's structure and tax treatment. The distinction sounds academic until an owner's accountant asks why your statement calls a payment of owner-held funds a draw. What the Terms Mean Where They Do Apply Both describe money moving from a business to its owners. Which word applies turns on entity type and tax classification, not on preference. Entity / tax treatment Common terminology Sole proprietorship Owner draw or withdrawal Single-member LLC, disregarded for federal income tax Owner draw or withdrawal Partnership Partner distribution; a guaranteed payment may apply for services or use of capital Multi-member LLC taxed as a partnership Member or partner distribution; a guaranteed payment may apply in certain circumstances S corporation Shareholder distribution, subject ...

Under ASC 842 a lessor classifies every lease at commencement as one of three types. If any of the five criteria in ASC 842-10-25-2 is met, the lease is a sales-type lease. If none is met but the present value of payments plus any residual value guarantee covers substantially all of the asset's fair value and collection is probable, it is a direct financing lease. Otherwise it is an operating lease. For a landlord leasing land or buildings, the answer is almost always operating, but "almost always" is not documentation, and the two exceptions are worth real money. This post takes the five tests one at a time with a real-estate example for each, shows the two situations where a property lease flips to sales-type, and sets out what an auditor expects to see in the file. The five sales-type criteria (ASC 842-10-25-2) A lease is sales-type if it meets any one of these at commencement. # Criterion What it means for real estate Example that meets it Example that doesn't (a) The lease ...

An owner ledger is the running record of money held and moved for one owner or ownership entity. Receipts, disbursements, fees, distributions and adjustments are recorded against it, and its balance carries forward from period to period rather than resetting when a monthly statement is issued. The owner statement is a window onto one month of that ledger. Most operators understand the tenant ledger well, because tenants ask about their balance constantly. The owner ledger gets less attention, and it is the one that determines whether your statements can be trusted. Three Records, Often Confused They sit at different levels and answer different questions. Record Tracks Answers Tenant ledger One tenancy What does this tenant owe? Owner ledger One owner, one entity What do we hold for this owner? General ledger The business What is the company's financial position? An owner ledger is a subsidiary ledger. It holds the detail behind a control account in the general ledger, and the sum of ...

Under ASC 842, a lessor with an operating lease keeps the property on its balance sheet, continues to depreciate it, and recognises lease income on a straight-line basis over the lease term regardless of when the cash arrives. There is no right-of-use asset and no lease liability on the lessor's books. The entries that matter are the monthly straight-line revenue entry, the deferred rent receivable that absorbs the difference between straight-line and cash, the amortisation of initial direct costs, and the treatment of incentives, variable payments and modifications. If you are the lessor, most of what you've read about ASC 842 doesn't apply to you. Nearly every guide online is written for tenants: ROU assets, lease liabilities, discount rates, remeasurement. Property companies sit on the other side of the same lease, and the entries are different, simpler in some ways and more error-prone in others. This post is the lessor's set, with numbers. What ASC 842 is and how to set up ...

Your owner statement is the monthly record of what your property earned, what it cost, and what your manager sent you. It is not a bill and it is not a tax return. It is an account of money held on your behalf. Most owners read the last number and stop. That number is usually the one that raises questions, and the answer is almost always somewhere above it. The Shape of the Statement Every statement, whatever software produced it, follows the same order: What your manager was holding for you at the start of the month Money that came in Money that went out Their fee Anything held back What was paid to you What they are holding now If your statement does not show all seven, ask for the ones missing. A useful owner statement shows the opening and closing position, not just the payment. Most owner statements are prepared on a cash basis, meaning they show what actually came in and went out during the month rather than what was billed. That matters when you compare the statement against ...

A CAM cap is a lease provision that limits how much a tenant's share of common area maintenance charges can increase from one year to the next, usually expressed as a percentage such as 5%. Caps almost always apply only to controllable expenses, the costs a landlord can influence through management decisions, and never to taxes, insurance or utilities. Whether the cap is cumulative, non-cumulative or compounding changes what a tenant pays by six figures over a ten-year lease, on identical wording everywhere else. That last sentence is the point of this post. The rate on a cap gets negotiated hard. The type of cap gets skimmed, and it's worth more. Why caps exist, and what they are not Tenants sign triple-net or modified-gross leases knowing operating costs will pass through to them. What they can't know is how well the building will be run. A cap gives the tenant a ceiling on the costs the landlord controls, so a management company that lets the janitorial contract drift 12% a year ...

A CAM gross-up adjusts a building's variable operating expenses to what they would have been at a stated occupancy level, usually 95% or 100%, before those expenses are allocated to tenants. It applies only to costs that rise and fall with occupancy. The formula is actual variable expense × (gross-up occupancy ÷ actual occupancy). Fixed costs like property tax and insurance are never grossed up. The clause exists because vacancy does two unfair things at once. In a half-empty building, the tenants who are there pay less than their true share of variable costs, and the landlord absorbs the rest. The gross-up puts both back where they'd be in a full building. Here is the calculation, done properly, with the errors that get landlords audited. Why a gross-up clause exists Picture a 100,000 sf office building that is 60% occupied. Janitorial, utilities and trash removal are running at $400,000 a year, but that's the cost of cleaning and powering 60,000 sf of tenant space, not 100,000. ...