March 2022
7 Ways To Protect Against Overpaying The Operating & Tax Expense Invoice Your Company Will Soon Receive
By: Carrie S. Holstead
It’s easy to think that simply checking the math in your operating and tax expense reconciliation invoice will protect your company against overpaying…think again. A cursory review allows for the possibility of mistakes that could be costly to your company. While it takes a significant amount of time to carefully scrutinize this invoice, it must be done. Our clients can simply send this invoice to us for review at no cost. Otherwise, here are important ways to protect your company.
1. Base Year
Confirm the base year expenses are accurate. For example, in reviewing the reconciliation invoice for one of our clients, we questioned the real estate tax increase and discovered our client was overbilled because the landlord had not included all the taxes in the base year, an error that would have been costly to the tenant if not found.
2. Building Size
Verify the building isn’t “growing”, meaning the size isn’t increasing from one year to the next.
3. Percent of Building
Make sure the percent of the building leased is accurate as this is the basis for determining the percent of the increase for which your company is responsible.
4. Cap on Expenses
Confirm the cap on expenses, if any, has been applied.
5. Proper Credit Applied
Confirm proper credit has been provided for estimated payments made. Also, if estimated payments far exceed the actual expenses, ask why the budget was so high which provides the landlord with the use of your capital instead of your company.
6. New Owner, Property Manager, Software
Understand that errors or glitches can occur when transferring information from one owner, property manager, or database to another. As such, be extra diligent in your review of reconciliation invoices following any change.
7. Protective Lease Language
Most importantly, prior to signing a lease make sure it includes language that will protect your company. For example, in performing due diligence for a client, we discovered that no one had previously advised them about an essential lease clause. We negotiated it into the renewal lease. This operating expense clause will save the tenant some $30,000 per year. For additional information, contact us.
All information herein is from sources deemed reliable, but no warranty, expressed or implied, is made.
