Did you know that you have a 90% chance of overpaying operating costs (CAM, Taxes and Insurance) under your lease, if you fail to check the calculation for accuracy. This comes from the December 2009 edition of Commercial Tenant’s Lease Insider.
Many landlords do not take the time to reflect tenant-specific exclusions, caps, etc. when calculating billings. Instead, tenants are required to catch and report errors. This post will show you one surefire method to reduce your lease costs.
What is a Lease Audit?
A lease audit simply compares the charges applied by a landlord to a specific tenant’s lease. This often minimizes lease costs, like CAM, taxes and insurance, and it ensures that all amounts billed are correct and in accordance with the lease prior to issuing payment. Goals of the audit are to identify and recover amounts paid in excess of what was contractually due, to initiate future changes in the way these charges are billed and/or to make changes in the lease to prevent future overcharges.
What Goes Into a Lease Audit?
Many things go into a lease audit. Some of the key actions taken include:
• Reviewing the CAM reconciliations for mathematical errors, lease exclusions, incorrect prorata share, and caps
• Reviewing supporting documentation such as invoices, tax bills, etc. on file
• Identifying additional documentation needed and requesting such information from the landlord
• Reviewing payment histories to ensure escrows were properly applied by landlords
• Identifying unusual increases
• Identifying reconciliation discrepancies
• Identifying CAM reconciliations due, but not yet received from landlords (if costs have not been reconciled, chances are a credit is due to the tenant)
• Communicating variances or discrepancies with the landlord and obtaining recovery of funds or satisfactory explanation with support documentation, such as copies of invoices, tax bills, etc., for the CAM charges in question
• Creating CAM statistics from the billing data to establish a history of CAM charges for each location
Who Performs Lease Audits?
You should be careful whom you choose to perform your lease audits. Insist on using nationally recognized and respected companies with experience in restaurants. One such company is SRS Real Estate Partners. They have 30 years of experience dealing with restaurants and their leasing issues. Using companies like SRS to perform a lease audit is one great way to save money in your ongoing lease costs.