What Is a Lease Audit and Does My Business Need One?

Posted by Casandra Properties on Thursday, September 10th, 2020 at 1:17pm.

There's about $6 trillion worth of commercial real estate in the United States. Businesses rent much of this real estate through the use of commercial leases that represent big dollars in profit for the landlord. 

Unfortunately, commercial leases can be complicated and confusing. This results in tenants potentially paying more than necessary. This is why many businesses have a commercial lease audit done. 

Have you had a commercial lease audit done? This guide will explain what the audit is and why your business needs one. 

Commercial Lease Audit

What Is a Lease Audit?

This process verifies and audits the landlord's expenses and other hidden costs. By reviewing your lease, you can ensure that the terms contained within get administered correctly. 

The actual process of a lease audit involves the inspection and examination of your lease documents.  A third party auditor will review your portfolio of commercial real estate and each associated lease. 

Why Get a Lease Audit? 

The short answer is that a lease audit can save you a lot of money. In some cases, you can even recover money that you've already incorrectly paid. 

The pass-through expense provisions can vary greatly from lease to lease. Landlords that manage multiple tenants can struggle to track these agreements accurately. This leads to standardized billing and a lack of unique tailoring for each tenant. 

Fail to get a lease audit, and you may be stuck with the higher payments. Many leases have a separate provision that states that if an invoice isn't contested within a certain period of time, they're deemed correct. To make matters worse, accepting these incorrect payments can set an unfavorable precedent that you'll be forced to adhere to in the future.  

Lease Audit Checklist

When performing a lease audit, the majority of the attention will be on the financial terms. Since this is the area where you are most likely to find incorrect calculations.

Many commercial leases also allow landlords to charge for some or all of the maintenance costs. These include repairs, some operations, and utilities, which don't qualify as tax pass-through expenditures.  

  • Rental rate 
  • Real estate taxes
  • Operational expenses 
  • Unusual events 

Why Shouldn't You Audit Your Own Leases? 

There are several challenges to auditing your own leases. First, the amount of time it takes. You have a business to run; you don't have time to be combing through invoices and lease terms. 

Second, you aren't an expert in commercial leases or auditing. Hiring a professional auditor lets you leverage their specialized knowledge and experience. 

 

Hire Lease Audit Services Today

As you can see, if you are a tenant in a commercial lease, then you may be spending more than you should. If you've never had a lease audit done, then you're overdue. 

Hire a reputable auditing service to go through your current and past lease invoices and payments. Then you can address any discrepancies discovered with your landlord. 

Browse our other articles for more great advice on managing your commercial properties. 

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