Save Your Company Money With a Lease Audit

At Cresa, we can save your company a great deal of money by examining your commercial lease. We offer a Lease Auditing and Forensics service that will provide a deep dive into the financials of a lease. Our team can determine the specific numbers that form the basis of our clients’ annual real estate expenses and find inconsistencies where they are being charged more than they should be.

Landlords should be in the process of providing tenants their operating expense reconciliations. The Building Owners & Managers Association (BOMA) International, the most trusted source for best practices, guidance, and standards for landlords around the world, estimated that as many as 75% of escalation invoices contain errors.

Lease Audit Benefits To Tenants

• Recover expense overcharges ranging around $1-$5+ per square foot on successful audits.
• Mitigate future overcharges with an ongoing reduction in charges that often reaches 10%.
• Contingency fees ensure that the lease audit pays for itself.

Below is an article from Maria Nenciu, Forensic Lease Auditor in our Toronto office. She lays out further reasons why a lease audit is appropriate now for your business, especially in the post COVID-19 environment.

Maria Nenciu is a Forensic Lease Auditor whose focus is to help commercial tenants control costs and increase productivity and efficiency. 

Isn't it time you got a Lease Audit?

February 22, 2021

By now, your Landlord should have provided your 2020 year-end Additional Rent reconciliation statement as well as their 2021 estimates – and odds are it is not what you expected.

The COVID-19 pandemic has created a misaligned set of expectations around operating costs.

In response to the COVID-19 pandemic, coupled with new provincial government mandates, Landlords have implemented several cleaning and safety measures. These include enhanced cleaning protocols, added social distancing signage and updated air filtration systems, to name a few. These safety measures drive up costs – and Landlords are looking to push these costs on to their Tenants.

Across Canada, offices are largely sitting empty, as Tenants work from home and vacancy rates continue to rise. With fewer Tenants using their space, Landlords ought to be experiencing decreases in Operating Costs for items such as repairs and maintenance, utility consumption and security. Tenants are expecting costs to decrease, yet many are finding the opposite to be the case. Understanding your rights as a Tenant versus what the Landlord is able to charge back is paramount.

Changes to the language in leases

According to most leases, Landlords have the right to make adjustments in their calculation methodology which can increase or decrease operating costs, if they determine it is reasonable to do so. As a Tenant, it is crucial to look at the language in your lease to understand the rights required to challenge the Landlord’s determination of Additional Rents. In many leases, Tenants only have a limited amount of time to ask for support documents/information from the Landlord. Understanding your rights, based on your specific lease, is important, particularly if you are being charged more than your appropriate share as per your lease. So, reading the fine print and being timely in terms of requesting and reviewing the Landlord’s support materials is more important now more than ever.

Why do a Lease Audit?

This year is different from years past. The pandemic has forced new practices and procedures around how Landlords operate their buildings. And these increased costs will inevitably be passed down to Tenants.

Are you certain the allocation of costs is being calculated correctly? Do you have a baseline for costs to compare against? Is the landlord appropriately passing COVID related costs to the Tenants? Are you being negatively impacted because of increasing vacancy and fewer Tenants for the Landlord to recoup its costs against?

As your workspace continues to be underutilized, isn’t it time to get a second opinion on your lease, to ensure every penny is accounted for?

How the Lease Audit process works

A lease audit is an invaluable tool to identify billing errors that often occur in commercial real estate leases. By reviewing your unique lease documents and the Landlord’s year end reconciliation, you can assess whether your company is paying your property owner more money than is legitimately due.

Cresa’s Lease Auditors perform a detailed analysis and year end reconciliation of your Landlord’s invoices, to ensure compliance with the lease terms you agreed to. They also do a historic review of prior year-end adjustments to determine if you are entitled to a refund or are obligated to make up the shortfall to the Landlord.

The financial benefit of a Lease Audit

Lease Audits are not only about recovering past refunds.  A thorough Lease Audit can create future savings by ensuring the Landlord does not repeat prior practices that cannot be justified.

This means real savings that stay with you – where it belongs. 

End of Article

Whether this is your first time conducting a lease audit, or you have engaged in a lease audit previously, this is a crucial year to initiate the practice. For more information on the process, please reach out to your Cresa Advisor.

Don’t overpay your landlord. Make sure you are only being charged what you actually owe and have your reconciliation statement reviewed by a Cresa advisor today. 

If you have significant questions about your current real estate strategy, it may be time for a lease audit.  Once we have done the audit, we can create a strategy to look at your business operations and current space and then craft up a plan to find something that is a great fit in the area.  With the current vacancies and inventory, we will work with you to get the best deal.  We represent tenants ONLY, so you can feel comfortable that we are working for your business 100%.  If we can help you by being your tenant broker in the DC, Maryland, or Northern Virginia area, visit my website or call me at 301-841-6542.  Make sure to follow all my social efforts by clicking on the links below. 

I specialize in providing comprehensive real estate services, 

exclusively representing corporate tenants on all commercial real estate needs.

Daniel Shapiro
Commercial Tenant Broker
2 Bethesda Metro Center, Suite 900
Bethesda, MD 20814

301-842-6542

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