MRI Recovery Billing Gross-Up Errors: The 5 Most Common Mistakes

MRI Software's recovery billing module is more granular than most other property management systems — which makes it both more powerful and more error-prone. The Share Type system gives MRI users precise control over gross-up methodology, but it requires careful configuration to match lease terms.

These five mistakes account for the majority of MRI CAM gross-up errors.

Mistake 1: Building-Level vs. Floor-Level Share Type Mismatch

Where: Recovery Pool Setup → Share Type field

MRI Share Type options:

• Building: Calculates occupancy and gross-up across the entire building
• Floor: Calculates occupancy only for the floor where each tenant is located
• Lease: Calculates based on individual lease terms (most granular)

The problem: Building-level and floor-level Share Types produce different gross-up results when occupancy varies by floor. In a 10-story office building where floors 1–5 are fully leased and floors 6–10 are 50% vacant:

• Building-level occupancy: 75%
• Floor-level occupancy for floors 1–5: 100%
• Floor-level occupancy for floors 6–10: 50%

Tenants on floors 1–5 with a floor-level Share Type are not grossed up (building is 100% occupied on their floor). Tenants on those same floors with a building-level Share Type are grossed up as if the building is at 75% — a significant difference.

How to check: Review each tenant's Share Type. Then review your lease terms for how gross-up should be calculated. If the lease says "based on building occupancy," use Building-level. If it specifies floor-level, use Floor.

Note: Many leases don't specify — in which case building-level is standard practice. Check what was represented to each tenant at lease signing.

Mistake 2: Variable/Fixed Expense Split Not Configured in Pool Setup

Where: Recovery Pool Setup → Expense Type flags for each GL account

MRI requires explicit designation of each expense as Variable (occupancy-dependent) or Fixed (not occupancy-dependent). Without this configuration, the system cannot correctly apply gross-up to only the variable portion.

Default behavior: New expense categories in MRI often default to Variable. This means any newly created GL account — including capital expenditures — gets added to the variable pool and grossed up until explicitly changed.

What commonly gets wrong:

• Property taxes flagged as Variable: taxes are fixed regardless of occupancy
• Insurance premiums flagged as Variable: insurance doesn't change with occupancy
• Capital improvement expenses flagged as Variable: CapEx should not be in the pool at all
• Management fees flagged as Fixed: management fees typically percentage-based, which makes them variable

How to audit: Export the expense type configuration for all GL accounts in the recovery pool. Review each account's Variable/Fixed designation. Any account that doesn't vary with occupancy should be Fixed.

Impact: If $100,000 in fixed expenses (taxes, insurance) are incorrectly flagged as Variable in a building running at 80% occupancy with a 95% gross-up threshold, the gross-up multiplier of 1.1875 overstates expenses by $18,750 — charged to tenants who have no obligation to pay it.

Mistake 3: Gross-Up Threshold Not Matching Lease Terms

Where: Recovery Pool Setup → Gross-Up Occupancy % field

MRI allows a single gross-up threshold per recovery pool — but your leases may specify different thresholds for different tenants.

Common scenario:

• Large anchor tenant (10+ year lease, negotiated 90% threshold): Pool-level 95% threshold overcharges them
• Standard small tenant (95% threshold in lease): Pool-level 95% is correct
• New tenant (no gross-up clause): Any threshold in the pool charges them for gross-up they don't owe

MRI's solution: Tenant-level overrides. Each tenant can have a recovery billing override that supersedes the pool-level configuration. However, these overrides must be manually configured for every affected tenant.

How to audit:

1. Pull every lease with a gross-up clause
2. Extract the gross-up threshold from each lease
3. Compare to the pool-level threshold in MRI
4. For any tenant where the threshold differs, verify that a tenant-level override exists with the correct value
5. For tenants without gross-up clauses, verify that gross-up is disabled at the tenant level

Mistake 4: Occupancy Calculation Period Mismatch

Where: Recovery Pool Setup → Occupancy Period Type

MRI uses occupancy data from a defined period to calculate gross-up. The period can be:

• Year-end snapshot: Occupancy on December 31 of the reconciliation year
• Average: Average occupancy across the reconciliation period
• Custom: User-defined occupancy percentage

The problem: Year-end snapshot occupancy can be misleading when a building had significant tenancy changes during the year. A tenant who vacated in October means the building shows lower occupancy at December 31 than it maintained for most of the year.

Why it matters: Using year-end snapshot when the building had mid-year vacancies produces a higher gross-up multiplier than the full-year weighted average would justify. This overstates the expense pool for remaining tenants.

Standard practice: Average occupancy across the reconciliation period is more defensible for gross-up calculations and better reflects the actual operating experience of the building. Most leases that specify gross-up methodology call for an annual average.

How to check: Compare the occupancy figure MRI is using for gross-up to the actual weighted average occupancy for the year. If they differ significantly (more than 3-5 percentage points), review which period type is configured and whether it matches lease requirements.

Mistake 5: Recovery Pool Hierarchy Errors in Multi-Building Portfolios

Where: Recovery Pool Setup → Property Assignment / Building Assignment

MRI supports hierarchical recovery pools — a pool can be configured at the building level, the property level, or across a portfolio. In multi-building portfolios, cross-building expense allocation is a frequent source of errors.

The problem: Shared expenses (management office, common area maintenance covering multiple buildings) need to be allocated across buildings correctly. If a shared maintenance pool is assigned to the wrong buildings, tenants in Building A pay for expenses from Building B's operating costs.

Also common: In a multi-building campus or mixed-use development, the recovery pool boundaries may not match the lease boundaries. A retail tenant's lease may specify "Building 1 only" while the recovery pool includes expenses from the shared parking structure across both buildings.

How to audit:

1. List every recovery pool in your MRI setup
2. For each pool, identify which buildings and properties contribute to it
3. Compare to lease definitions: what boundaries does each tenant's lease specify?
4. Any mismatch between pool boundaries and lease boundaries is an error

Independent Verification

MRI's recovery billing module will not self-report these errors. If you configure gross-up at 90% when leases say 95%, MRI calculates exactly what you told it to calculate — it doesn't know your leases say something different.

CapVeri provides independent verification: upload your MRI GL export and lease terms, and CapVeri recalculates each tenant's reconciliation independently — using the lease terms, not the MRI configuration. Discrepancies between what MRI produced and what the lease requires are flagged with the specific clause and the dollar impact.

Related Resources

• CAM Reconciliation Guide — Complete step-by-step reconciliation process

• MRI Software CAM Setup Guide — Configuration walkthrough for MRI recovery billing

• Gross-Up Clause Explained — How gross-up clauses work in commercial leases

• CAM Gross-Up Calculator — Model gross-up scenarios at different occupancy thresholds

• Yardi vs. MRI for CAM Reconciliation — How CapVeri compares to MRI's built-in reconciliation module