When you have multiple commercial leases in your portfolio, it can be difficult to track all the fine details. Compiling lease abstractions can provide your company with easy points of reference and make it easier to manage and evaluate your portfolio. Read on to learn more about these important commercial real estate documents.
What Is a Lease Abstraction?
A lease abstraction summarizes the key points of a commercial lease agreement. Most documents are between one to five pages long, allowing you to quickly access data.
Why Do You Need a Lease Abstraction?
Commercial real estate leases are long-winded and feature complicated terminology. If you need to look up a fact such as when you need to renew a particular lease, you have to comb through many pages to find the information that you need. A lease abstraction saves you time by spelling out the most important information in a simple, easy-to-read document.
What to Include in Lease Abstractions
Lease abstractions typically include a breakdown of costs, including operating costs, common area maintenance costs, rent and rent escalations and the costs of periodic repairs. The lease abstraction should also clearly state the lease term and the renewal options along with pertinent deadlines. Key rights such as the right of expansion or subleasing should also be mentioned. It's also important to include information about security deposits in the abstract. Templates are available to make creating abstracts easier. Including tables and charts in abstractions can be beneficial.
Important Things to Remember
Keep these tips in mind when creating abstracts:
1. Double Check Everything
Accuracy is of the utmost importance with lease abstractions. A document won't be helpful if costs are not calculated properly or dates are not correct. Make sure that you proofread the document and double check all facts and dates. It's beneficial to have a fresh set of eyes look over the abstraction before you produce a final document.
2. Stick to the Same Format
Using the same format for all of your lease abstractions will make it very easy to compare properties and to locate information when you need it. Plus, sticking to a consistent format will simplify abstraction creation when you add new properties to your portfolio.
3. Use References
Although abstractions will be enough for many property management tasks and questions, there will be times when you will still need to refer to your lease in order to see exactly how specific clauses are phrased. To make things easier, place page and paragraph number references on your abstraction.
4. Make Sure You Understand Your Lease
You won't be able to create an accurate abstract if you don't fully understand your lease. Consult a real estate lawyer to explain any language that doesn't make sense to you so that you can accurately summarize it in your abstract.
5. Brief Is Better
Make your abstraction as succinct as you can without leaving out any important information. It may be difficult to drill down complicated lease terminology into simple, short phrasing, but the time you will save on future review is more than worth the effort.
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