Your real estate portfolio represents one of your organization’s biggest operating expenses. And if you’re not careful, you could wind up paying a lot more than you have to. Lease audits are a crucial process for ensuring that you never pay charges you aren’t legally responsible for according to your lease agreement.
As landlords review operating expenses for their properties, they’ll often pass common area maintenance (CAM) charges to tenants that don’t qualify as tenant responsibilities under the terms of the lease. Whether you conduct lease audits through an outside firm or your lease accounting department, these help you identify overcharges by reviewing the language of your lease and evaluating whether the expenses qualify.
It’s a time-consuming process. But depending on the scale of your lease portfolio and operations, lease audits can generate tens of thousands in savings each year. And while it’s certainly convenient to work with a firm that specializes in lease audits, there are ways to streamline your internal process as well—which could allow you to keep more of the savings.
Here are three tips for conducting lease audits in-house.
One of the major challenges with lease audits is being consistent across your portfolio. Every lease is a little different. Landlords will use different terms for the same line items. What you might consider a single category of expenses could encompass several individual charges from an individual landlord. For example, one landlord may list snow removal, ice removal, and salting as three separate items, while another might lump it all under “winter parking lot maintenance” or simply “snow removal.”
This often leads lease accountants to either drop everything into an all-encompassing “miscellaneous” category or constantly create new line items. Neither of these solutions are ideal. By creating a lease audit template, you can work from a fixed picklist that encompasses the 20–50 expenses you care about. Then it’s easier to identify if a landlord’s description fits one of your key items, and you can apply consistency across the portfolio, while allowing room for personalization at the lease level. It turns lease audits into a repeatable process, and you can train people to complete it the same way.
With Tango Lease, building templates is a breeze. Create your picklist with the expenses that matter to your organization, then when you review your charges, simply match your landlord descriptions to these items.
When you keep your lease data in a folder full of spreadsheets, it becomes a lot less valuable. Sure, you can perform all the calculations you need, but the lack of organization makes it difficult to compare commonalities and identify inconsistencies.
You might miss, for example, that you have 10 leases with the same landlord, and one of those leases includes an expense that this landlord hasn’t charged on the others, or uses a different description. Or perhaps you have a dozen leases with similar language that didn’t consider HVAC repairs to be a tenant responsibility, and one landlord lumped it in with another category. Having the tools to analyze lease expenses in your portfolio helps inspire new cost-saving insights, making every audit more effective.
Tango Lease puts the power of big data to work, organizing your entire lease portfolio and giving you convenient filters to examine each lease in relation to your others.
Reviewing lease terms is a tedious process. Even with the best lease abstracts and plenty of time to dig through relevant clauses, you’re bound to miss some of the language that frees you from responsibilities. Similar wording or missing context can easily cause costly human errors.
That’s why Tango Lease applies automation to your portfolio. Our CAM/OPEX Reconciliation tool crawls your leases and charges to identify expenses you aren’t responsible for. It automatically audits and reconciles CAM charges, so you don’t have to worry about whether your team may have missed something. In fact, our CAM/OPEX Reconciliation tool can save businesses more than $100,000 in yearly overcharges.
Overcharges like these aren’t the only occupancy costs businesses tend to miss. Want to learn about more of these “hidden costs”? Download a free copy of The Lean Rent Playbook: How to Avoid Hidden Occupancy Costs.
Companies like yours make lease overpayments all the time. It happens because both landlords and tenants lack the tools to efficiently navigate their lease portfolios. Even with a massive lease department, you’re bound to have human errors, especially with how difficult it is to detect some overcharges.
Tango Lease organizes your entire portfolio into an easily searchable database. You’ll have everything you need to analyze your leases and discover cost-saving opportunities. Better yet, our software finds them for you automatically.
Want to see how Tango Lease simplifies lease auditing?
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