It's That Time Of Year When Tenants Receive An Invoice For Operating & Tax Expense Increases... Do You Know How To Keep Your Company From Being Overcharged ?
March 17, 2010 | Posted In Insider's View, Newsletters
Today we reveal what a growing number of corporations are doing to tap into the multi- million dollar cost savings being enjoyed by some corporate office tenants… They are hiring professionals who specialize in auditing office leases to determine if they are being overcharged. The first step, which should be provided FREE OF CHARGE AND WITHOUT OBLIGATION is to have the auditor complete a preliminary review of the operating and tax invoices along with the lease to determine if it is likely for an audit to result in significant cost savings. Our audtiro has found that about a third of the time no audit is warranted or the lease language is too prohibitive to achieve any significant cost savings. The rest of the time an audit is warranted. For these companies, so far out auditorr has SAVED TENANTS $14 MILLION (about $5 million of this is related to base year audits). Clients are typically tenants leasing 20,000 square feet or more as they have a greater potential for over billing.
How do lease auditors save money for corporate tenants? They look for costs that are either unreasonable or not permitted by the lease and therefore should not be passed through to the tenant, such as: Excessive payments to affiliates of the landlord for expenses like management fees; Amortization of capital projects; Reserves; Landlord’s entity expenses (tax returns, corporate filings); Expenses related to other properties owned by the landlord; Improper measurement of the tenant’s space by the landlord; Tenant electric being marked up before being billed back to the tenant; Base year expenses being understated; The proper calculation of grossed up expenses; Etc.
When is the best time to have a lease audit?
- 1. The first year the tenant is responsible for operating expenses or tax pass throughs
- 2. When a building is for sale
- 3. When the ownership changes
- 4. In the final year or two of a lease
- 5. Any time the controllable expenses rise beyond what is reasonable
Meet our lease auditor. Paul Stevens worked on the landlord’s side of the transaction for twenty years. He was an asset manager for Equitable Real Estate and its successor, Lend Lease Real Estate, and was responsible for creating value for the owner’s real estate investments. His unique combination of real estate experience, plus holding the designations of Certified Public Accountant (CPA) and Real Property Administrator (RPA), gives him an unparalleled insight into an owner’s philosophy. He has saved tenants throughout the U.S. more than fourteen million dollars. There is no cost for a preliminary review to determine if a lease audit is advised.
Sources: Carrie S. Holstead Real Estate Consultants, Inc.
& P. Stevens Associates, Inc.
