Lease AuditUniversity

Criteria for Selecting a Lease Audit Firm

Many tenants are retaining outside firms to audit their leases. Fourteen criteria for choosing one, grouped by focus, expertise, alignment with client needs, capability and fees.

Demystifying the Difference Between Net and Gross Leases

“Net Lease” and “Gross Lease” are among the most commonly used terms in real estate, and among the most loosely used. What each one means, where Modified Gross and Hybrid leases fit, and why lease language should spell out the obligations instead.

Before You Move Into an Empty Building, Know This

Office buildings with vacancies often have distorted expense pass-throughs. This brief case study outlines why and how this can become an issue for tenants…

Protecting Yourself in Base Year Leases

The Modified Gross lease is the most favored form for multi-tenant office space, but if the Base Year is understated, the tenant’s increases are overstated for every year of the term. Four gross-up precautions to draft into the lease.

Prepare Your Budgets Properly

Building operating costs may inch up by only 3–4% a year, yet a tenant’s escalation liability will usually more than double in the first year and keep rising by 50%, 33% and 25% thereafter. Simple math, and a worked example, for anyone budgeting a base year lease.

Capital Expenditures: Includable or Not?

One of the most hotly debated items in operating expense clauses is whether capital expenditures belong in tenant pass-throughs. Why replacements, extraordinary repairs and improvements are already covered by the rent, the one exception worth allowing, and how any allowed cost must be spread over its useful life.

Cost-Reducing Capital Expenditures

Most leases let the landlord pass through the amortized cost of capital expenditures that reduce operating costs. Which expenditures that provision is really meant for, the three limits tenants should insist on, and how to keep “incidental efficiency” from justifying any replacement.

Measurement of Square Footage

The size of the premises is one of the most important factors in the tenant’s leasing decision. It is imperative that this factor receives the proper attention during the lease negotiations and the drafting of the lease documents. This article discusses critical issues such as rentable and usable space, the different measurement standards applied, the linkage between size and rent, and how best to protect a tenant’s interest during the lease negotiation process.

Negotiation Skills: The Most Important Ingredient in Lease Auditing

To achieve that success, lease auditing cannot rely exclusively on accounting and auditing skills…