Should My Company Audit Our Landlords if We Love Them?

Guest Post by Sara Stanley, MCR, Managing Director, Commercial Tenant Services, Inc.

Should my company audit our landlords even if we’re on good terms – even if we love our landlords? Yes!

Lease Audit is no longer a cringe-worthy term. It is necessary for governance, compliance, and shareholder responsibility. “What gets measured, gets improved” is a quote repeated by CEOs and for good reason: Benchmarking is fundamental to any business.

Here are five common questions around deep dive lease audits:

1. My landlord sends documentation. Isn’t that all I need?

It may seem so. However, landlords and their employees are not experts in the fields of proper operating expense and CAM allocations, complex Real Estate Tax issues, and complicated building operating systems. Most times, landlords do not supply all pertinent back-up to bills. Lease audit teams are experts around utilities, lighting, building management structures, and lease language. Verifying what you are paying is best practice.

2. Will auditing my landlord cause conflict?

Correcting billing errors often strengthens relationships and respect between landlords and tenants. Lease audit is now commonplace in most industries.

3. I am in negotiations with my landlord currently. Shouldn’t I wait?

“Event” Reviews are the best times to reduce spend and increase cash flow quickly. These events may include change in management, sale of a building, executing an estoppel, renewal discussions, base year reviews, improvements/renovations, and other transactions.

4. We are already stretched thin; how can my team make time for lease audit?

Most lease audit firms are capable of autonomously performing this function and work well with lease administration teams, oftentimes removing burdens for already understaffed/overworked organizations. Streamlining and improving efficiency for a company’s current process is often a natural outcome during these projects.

5. We are not centralized. How is lease audit even possible?

Believe it or not, many Fortune 100 Companies are “siloed” or in process of changing internal systems. The lease audit function can be performed whether leases and bills are neatly housed in one database or have a lot of not-so-organized methods (hard copies sent to different regions or even lost!).

The majority of overcharges paid by tenants are unintentional. Simple errors create billions of dollars in tenant overcharges. Deep dive reviews by a conflict-free lease audit firm (all alliances and arms of the firm working only for tenants) may be a great project for your team.