Sep 25, 2014 8:45:00 AM

Importance of Commercial Lease Abstraction

By Don Catalano

Connect

Tips to help you with commercial lease abstraction

If you ask a residential Realtor, they will tell you that "underneath all is the land." In the corporate world, though, we know that the most important thing is the lease. Everything we need to know about our occupancy rights and responsibilities is contained in that document. Lease abstraction is the process by which the information gets taken out of the lease, leaving you with an easy to use document that you can quickly analyze.

The Problem with Leases

Leases are comprehensive, but they aren't always useful documents when you are trying to quickly access business points. Since they are primarily legal agreements, many are long, running into tens or even hundreds of pages. Furthermore, leases come in different formats. Some might be brief and have business terms interspersed throughout them. Others can be very long, but have all of their key terms broken out in an appendix. This makes them easier to read, but also carries the risk of one important fact being buried in the lease's language, making it likely to be missed.

If your company has negotiated or renewed the lease, the document might end up having multiple appendices, additions and addenda attached. This makes the process of parsing the document even more complicated. It also increases the risk that the persona reading the lease could misunderstand or make an error.

Lease Abstraction

Instead of constantly going back to lease documents, many companies choose to go through the lease abstraction process. When they do this, they create a summary of all of their lease documents. These summaries, called abstracts, contain all of the information that the company's team needs to manage a real estate portfolio. Furthermore, since the company controls the abstracting process ,they can translate all of the different lease formats into a single abstract form. This makes it very easy to compare leases to each other.

Lease abstraction requires you to very carefully read each lease once, so that you can get an accurate abstract. While it can be a great time saver in the long run, making a mistake in an abstract could be very costly, since that mistake will keep showing up every time you use your abstract. With this in mind, some companies choose to use attorneys or third party services that are not only professionals at the lease abstraction process but that are also insured against errors.

Beyond the Abstract

Simply creating abstracts to save you from having to flip through leases whenever you need information on a property is valuable in and of itself. However, when your abstracts are completed in a machine-readable format, they let you harness the power of software like REoptimizer® to let you manage your company's real estate. Furthermore, when the abstract is machine readable, you also eliminate the time and risk of errors that comes up when you re-enter the data into your software.

Lease abstraction might seem like a time-consuming process that, in the grand scheme of things, does not save a great deal of time. However, when you add up all of the time necessary to go back and forth through leases and you factor in the potential cost of  human error in reading those documents, its value becomes much clearer. Computerizing the abstracts further increases their value, especially when they are used in conjunction with workplace or facilities management software.

 

Here are a few other commercial leasing articles:

Understanding Lease Escalations

Should You Still Lease Your Space?

5 Tips for Commercial Lease Abstraction

 

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Topics: Commercial Lease Abstraction

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Don Catalano

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