Commercial real estate bookkeeping: rent, recoveries, and inducements done right

Commercial rent is taxable — code every dollar of it, and every dollar of additional rent

Base rent is a taxable supply for GST/HST purposes. So are CAM charges and property tax recoveries billed to a commercial tenant. That's unlike the exempt long-term residential rent a landlord charges. That means HST applies to the full invoice. Input tax credits are claimed on the building's operating costs, the same way any other commercial-activity registrant claims them. Every lease needs its own revenue and recovery codes, rather than one blended "rent" line for the building.

Percentage rent, where a retail tenant's lease includes additional rent tied to their sales once a threshold is crossed, needs its own tracking too. Most leases require the tenant to report sales figures. The additional billing only gets calculated correctly if someone is actually watching for the threshold, rather than waiting for the tenant to volunteer it.

CAM and TMI recoveries: estimate monthly, reconcile once a year, expect questions either way

Additional rent for CAM, taxes, and insurance is billed monthly against a budget. It's then trued up annually against actual costs, producing either a credit or an additional bill to each tenant based on their pro-rata share of leasable area. We keep the supporting detail by expense category (insurance, utilities, snow removal, management fee) in a form that matches what tenants see on their reconciliation statement. That's because a CAM true-up without documentation is the fastest way to start a dispute with a tenant who is entitled to ask how the number was calculated.

Tenant inducements and free rent: the deal is priced over the whole term, not the month cash moves

A large tenant improvement allowance paid to help a new tenant build out their space is generally capitalized and amortized over the lease term. It's not expensed the month it is paid. Any period of free or reduced rent negotiated at the start of a lease is recognized on a straight-line basis across the full term for financial statement purposes. So revenue shows evenly, even though cash collected in month one is lower than cash collected in month thirteen. Skipping this step makes a new lease look like a loss in its first year and an unexplained jump the year after. In fact, nothing about the deal changed.

Deposits sit on the balance sheet, and the rent roll software has to match the general ledger

A commercial lease deposit or a last month's rent payment collected up front is a liability the day it arrives. That's the same principle we apply for residential landlords. It only becomes income when it is actually applied against a final invoice or forfeited under the lease terms. We hold these in a dedicated liability account by tenant, so the bank balance is never mistaken for money the building has actually earned. Only the interest portion of a blended mortgage payment is deductible. So we split principal and interest from the amortization schedule every month too, the same discipline as any other leveraged property.

For portfolios running on Yardi or MRI, or a spreadsheet-based rent roll for a single plaza, the software's tenant-level detail should reconcile to the general ledger monthly. A rent roll that shows one number and a bank deposit that shows another is usually a sign something was applied differently in the two places. Often it's a tenant's partial payment or a CAM adjustment.

One property, one set of books — the same discipline as a residential portfolio

Multi-property owners get a class or division per address in QuickBooks Online. That's the same structure we use for self-storage operators and residential landlords. So a lender, a partner, or a buyer can see any one property's performance without untangling it from the rest of the portfolio. The wider bookkeeping toolkit is on our bookkeeping services page. Owners with US property or US tenants should see our cross-border guide for commercial real estate investors.