Because a lease agreement permits for multiple miscalculations and mistakes in billing, your internal effort in reviewing complex contracts for large amounts of leased space will benefit from outside expert audit.
When leased space exceeded 100,000 ft. you should generally expect your recoveries from an external tenant lease review to be at least.1% of your total occupancy costs from the precedent four years. This is true for commercial, industrial, and office users.
The review goes deeper than the lease abstract and drills down into granular detail to unforgettable unseen inconsistencies between what your lease agreement obliges you to pay and the amounts you were billed and paid. Errors occurs in a variety of component costs here's a distribution of errors by occurrence.
Common Area Maintenance 22%
Real Estate Tax 26%
Repair and Maintenance 8%
Subtenant Billings 6%
Tenant Improvements 2%
Statement Credits 3%
Of the countless ways landlords have overcharged tenants, here are a few …
- Repairs done to other units.
- Administration fees charged on management fees.
- CAM charges not directly related to the common area.
- Upgrade / capital improvements misclassified as maintenance.
- Expenses applied in a single year instead of amortized.
- Calculating CAM with denominator set at gross leased space instead of gross leasable .
Once the overcharges are detected, a good tenant lease review next requires clear and courteous correspondence with your landlord. See the censored example below
We are currently reviewing our occupancy cost disbursements and we have determined that, regarding our ______________ location, for the years 2008, 2009 and 2010 combined, we have incurred $ 64,937 in charges for which we are not liable to the terms of our Lease.
Section 4.3 of our lease states that our operating expense obligation is limited to our prorata share of CAM costs in excess of the "Allowance." Section 4.3 of our Lease states that the "Allowance" is our actual 2008 Operating Expenses.
However, for each of the years 2008, 2009 and 2010 you charged us for our prorata share of all Operating Expenses causing us to incur $ 64,937 in excess costs as follows.
(Confidential Client information censored)
Please review the contents of this letter and send a check or credit for $ 64,937 to my attention.
The most sophisticated real estate departments leverage outside audits to maximize their internal audit capacities. DCI Solutions can partner with your internal audit to ensure you only pay what your original lease requires you to pay.