Sep 25, 2017

Tips for your Commercial Lease Audit

By Don Catalano

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Tips for your Commercial Lease Audit.jpg

Cost conscious tenants have different ways of controlling costs. One of the most efficient ways by most corporate tenants is conducting commercial lease audits. These audits are aimed at determining whether a corporate tenant is paying more money as rent than is legitimately required. If so, the tenant is entitled to seek recovery of overpayments.

 

Luckily for corporate tenants, lease auditing fits just about any company’s cost-containment. First-time corporate tenants, however, usually struggle with the intricacies of this whole complicated process. So, what are the aspects that a corporate tenant should consider when having a commercial lease audit done? Well, here are some helpful hints:

 

Calculate the Amount of Leased Space

Square footage is a key factor in commercial leasing because it usually dictates the financial terms of the deal. For the base rent to be determined, landlords and tenants usually agree on a fixed rent on a cost per square foot. Furthermore, tenants are required to pay a certain percentage for common area maintenance or operating expenses and taxes.

 

Since square footage ties all of the financial terms, it’s crucial for a commercial tenant to understand how square footage is calculated. The preferable calculations to tenants are those that include only usable square footage of a premises. Tenants should pay attention as some landlords take measurements of gross square footage, which includes shafts, stairways, and exterior walls.

 

Know the Rental Rates in the Area

Corporate tenants can obtain baseline information about the average rent cost in the area from a good tenant rep broker. Having a tenant rep broker by your side can ensure that you do. With their knowledge of the market in your area, brokers can tell you when a deal is fair, overpriced or a steal.

 

Analyze the Assignments and Subleasing Requirements

It’s important to know beforehand whether you have the right to assign or sublease all or a portion of your space to another tenant. In the case you have that right, you should familiarize yourself with the approval process for obtaining permission to assign or sublease the space. Moreover, you should know the amount you have to pay in order to exercise this right.

 

Evaluate the Extension Options

 

A corporate tenant should also seek to know whether they will be able to extend their lease and if so, whether they will be required to provide the landlord with a notice. It’s also crucial for the tenant to understand how the rent will be calculated for the additional space. In case there is space available to accommodate the expansion, the tenant should seek to know whether they will be able to take the entire space or a portion.

 

Should a corporate tenant find any areas of concerns when making the above considerations, it’s best that they hire a professional corporate lease auditor. The audit can be done before the tenant signs the lease agreement. In case the tenant has already signed the lease agreement, the renegotiation process can be instigated.

 

Here are some other commercial lease audit articles:

When to Do a Commercial Lease Audit

Ways to Conduct a Commercial Lease Audit

The Importance of the Commercial Lease Audit

 

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Topics: commercial lease audit

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Don Catalano

Don Catalano

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