How you can benefit from a Lease Audit?
Real estate is often one of the largest expenditures after payroll and while these costs continue to rise, most tenants are left confused and uncertain as to what they should and should not be paying under their lease obligations. An effective lease audit will help recover previous overpayments and reduce future expenses, but only if done properly.
- Cost reduction and expense recovery
- Desktop reviews
- In-depth lease audit
- Verification of all real estate related invoices
- Verification and approval of all year-end operating expense and tax adjustments
- Customized reporting
What is a Lease Audit
In short, it is a comprehensive and detailed analysis of all your lease related costs/payments and validation against your lease documentation to ensure that all amounts invoiced by your landlord are correct and in accordance with industry common practice and accounting standards.
How will a Lease Audit benefit you?
- Recover amounts that have been overpaid in previous years
- Reduce occupancy costs going forward
- Identify unfavorable lease clauses for remedial action during renewal negotiation
- Elevate fraud awareness and deter fraudulent activity
- Identify, develop and implement process improvements
- Ensure that the investment of time and money spent on negotiating lease clauses is captured by benefiting from those rights
What are some of the challenges in conducting a Lease Audit
- Leases are complex documents designed to allocate risk and expense between the parties and often include a limited timeframe for the tenant to identify and contest any charges that may be inaccurate.
- An effective lease audit requires:
- Experience with leases and the laws for each area where a lease is concerned
- Experience with accounting to ensure charges are in compliance with the lease as well as GAAP
- Experience with the real estate industry to understand standard practices for allocating costs in the type of location under review (i.e. industrial, retail, office, multi-use)
- Experience with auditing to consider the cost-benefit in determining the scope of lease audit requirements at both the portfolio and location level
- Experience with negotiations and understanding the Landlord’s perspective to ensure that the Tenant-Landlord relationship is taken into account
Areas where tenants commonly overpay include:
- Inaccurate proportionate share calculation
- Uncollected tenant allowances
- Improper calculation of rentable area
- Failure to apply base rent and additional rent credits
- Charges not in compliance with the lease
- Charges not in compliance with General Accepted Accounting Principals
- Expenses double-charged in operating expenses and directly to the tenant
- Landlord and/or other tenant costs included in operating expenses
- Expense capping not in compliance with the lease
- Provisional payments not accurately credited
Why use Landmark to audit your lease?
- A wealth of experience and expertise all under one roof including lease auditors, lease administrators, real estate lawyers and transaction managers
- In-house legal counsel available for lease interpretation for every audit at no extra cost to the client (no need for external legal counsel)
- Quickly identify the potential for success in any given file before it is started
- Sensitive to the tenant-landlord relationship and we approach every single audit with this in mind
- Flexible payment options depending on what is permitted under your lease (contingency vs fixed vs hourly fee)
Landmark’s Lease Audit process
We follow a comprehensive and structured process for each and every audit to ensure a cost-effective and timely approach is used with minimal disruption to the relationship with your landlord.