AI agent · Real estate · Compare period to period
Service charge reconciliation
At year end the agent compares each building's service charge budget with actual costs, tests every cost against what the leases allow, and apportions the result to tenants. Property accountants see only the variances, each with its reason.
Typical volumes for this process, not a client figure.
Budgets versus actuals, across buildings, in spreadsheets.
Reconciled per building; only the variances need a person.
Where the time goes today
Each building has a service charge budget set at the start of the year, split into cost heads such as cleaning, security, maintenance, utilities, insurance and management fee, and apportioned among tenants by floor area, weighting or fixed shares. During the year, costs arrive as supplier invoices, contract instalments, utility bills and internal recharges, coded to buildings and heads, not always correctly. At year end, property accountants reconcile budget against actual building by building in spreadsheets, and send each tenant a statement with a balancing charge or credit.
The work is heavy because it repeats across the portfolio, and fragile because the rules differ by building and by lease: which costs are recoverable, caps and exclusions, sinking fund contributions, vacant units the landlord must absorb. Typical errors are a capital project charged as maintenance, an invoice coded to the wrong building, a cap ignored, or a vacancy apportioned to the tenants who remain. Tenants challenge statements, and every challenge means reopening a spreadsheet months later.
How the agent works
- Collect the actualsThe agent pulls the ledger entries for each building and cost head, together with the invoices and contracts behind them, and checks that each invoice is coded to the building it describes.
- Test recoverabilityEach cost is tested against the recoverable heads, exclusions and caps in the leases, taken from the lease abstracts. Capital items and costs the leases do not cover are flagged with the clause.
- Compare with budgetPer building and per head, actuals are compared with the budget and with the previous year. Every variance above your threshold is explained from the underlying documents.
- Apportion to tenantsEach tenant's share is calculated under their lease, applying vacancy rules and caps, and the balancing charge or credit is worked out.
- Draft the statementsThe agent drafts year-end statements, the variance commentary and the working papers, and passes them to the property accountant for review.
What stays with a person
Property accountants and managers decide whether a disputed cost is recoverable, how to treat an item the lease is unclear about, and whether to absorb a cost as goodwill. Statements are approved and sent by a person, because they go to customers and often open a negotiation.
Tenant challenges, audits requested under a lease, and any settlement are handled by people, with the agent's working papers as the record. Changes to budgets, and to apportionment schedules when units are merged or remeasured, are also the team's decision.
What it reads, what it produces
| It reads | It produces |
|---|---|
| Service charge budgets by building and cost head | A reconciliation per building, budget against actual by cost head |
| Ledger entries coded to service charge | Costs flagged as possibly not recoverable, each with the lease clause |
| Supplier invoices, maintenance contracts and utility bills | Variance commentary tied to invoices and contracts |
| Lease abstracts: recoverable heads, caps, exclusions, apportionment | Tenant apportionments with balancing charges or credits |
| The tenancy schedule, with occupancy and vacancy dates | Draft statements and full working papers |
| Last year's reconciliations and statements |
Controls that come with it
- The variance threshold per head is set by finance, and every variance above it is explained.
- No statement leaves without an accountant's approval.
- A recoverability flag always cites the lease clause; borderline items are never decided by the agent.
- Each cycle, an accountant rechecks a sample of buildings that showed no variances.
- Working papers keep every cost, its coding, the recoverability test and the apportionment. A corrected statement is reissued under your reissue procedure, and the earlier version is kept.
How you know it works
- Days from year end to statements issued, per building
- Tenant challenges per statement, and how many are upheld
- Costs reclassified as not recoverable at review
- Miscoded invoices found and corrected before statements go out
- Accountant hours per building
Is your process ready?
- Recoverable costs, caps and apportionment rules are written in the leases and already abstracted. Where they are not, lease abstraction comes first.
- The accounting and property management systems export ledgers, budgets and tenancy schedules, and their licences permit software access.
- A variance explanation can be checked against the invoice behind it in a minute.
- The number of buildings and tenants makes year-end reconciliation a multi-week effort.
- Accountants and property managers agree how to treat the usual grey areas, such as replacement against repair, and have written it down.
The five candidacy checks are explained, with an exam, in the free Module 01.
What goes wrong
- Ledger coding is wrong at source, and the reconciliation faithfully compares miscoded costs. Invoice-level checks catch some of it; the coding practice still needs fixing.
- Lease abstracts lack caps and exclusions, so the recoverability test passes costs it should flag.
- Mixed-use buildings run several schedules (retail, offices, parking), and shared costs are split between them inconsistently.
- Vacancy dates in the tenancy schedule are wrong, and so is every apportionment that depends on them.
- Statements are correct but ignore local rules or codes of practice on their content and timing. Check what applies in each place you own buildings.
Questions we get
How does it decide whether a cost is recoverable?
It tests each cost against the recoverable heads, caps and exclusions in the relevant lease abstracts. Clear cases are marked recoverable or not, with the clause. Borderline items, such as a repair that may be an improvement, are flagged with the invoice and the clause side by side, and the accountant decides.
Can it handle buildings where every lease is different?
Yes. Rules are held per lease and per schedule, not per building, so two tenants in the same building can have different caps, exclusions and shares. The apportionment is calculated tenant by tenant. This depends on the lease abstracts being complete, which is why abstraction usually comes first.
What does a variance explanation look like?
It ties the difference to documents. Cleaning above budget because a new contract started mid-year at a higher monthly rate, with the contract and its first invoices attached. Maintenance above budget because of one repair invoice that may be capital. Where no document explains a variance, the agent says so, and the accountant investigates.
Does it set next year's budget?
No. It can supply actuals by cost head and known contract changes as input, but setting the budget is a decision for property managers, including any consultation with tenants that the leases or local rules require. Keeping reconciliation and budgeting separate also keeps the working papers clean for a tenant audit.
Want this agent on your process?
Tell us about your version of this process — volumes, systems, what goes wrong. A person answers with an approach and a price, usually within two working days, or tells you it is the wrong project.