CAM audits, Lease abstraction, Lease Administration
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November 30, 2021
by ADMIN

Lease Administration post: A Quick CAM Audit checklist for tenants

Common Area Maintenance (CAM) charges form a major chunk of your lease costs. It is not uncommon for tenants to find that they have been overcharged erroneously by the Landlord. In our blog this week, we provide a checklist that tenants can refer to when verifying their CAM charges. This checklist highlights the most common areas of error when it comes to CAM Charges.

New tenants moving into the property mid-lease year or existing tenants expanding their area

Generally, CAM expenses are shared on a pro-rata basis among all the tenants in the premises. This means, if you move into an empty building or a building with fewer tenants, the CAM charges will be higher. At the same time, if new tenants move into the premises, the pro-rata share per tenant will decrease as the total CAM expenses will now be shared by all the tenants, including the new ones. So, one of the areas to consider when auditing your CAM expenses is, if there were any new tenant move-ins during the lease year. Along the same lines are expansions. Sometimes, an existing tenant may lease out more area in the premises which will again affect the CAM share of other tenants by lowering their CAM expense.

Amortizations

Sometimes, leases allow landlords to charge tenants for certain capital expenditures that they incur. Usually, such expenses are a result of specific capital improvements undertaken by Landlord for the tenant(s). The Landlord may then amortize the amount over the entire lease year. As a tenant, you may want to confirm if the amortization calculations are accurate. Similarly, as in the case of CAM, if the capital improvements pertain to a common area or all leased locations within the premises, then the amortization amount may also differ once the occupancy in the leased premises increases.

Expense caps

Another thing to consider is the limit on expenditures, commonly referred to as expense caps. Check your lease agreement to understand the kind of expense cap it enforces. When you have an expense cap clause, it specifies the percentage by which the Landlord can hike the CAM charges every year. Make sure the calculations presented by your landlord are in line with the expense caps your lease specifies.

Exclusions

Last, but not least, check for any exclusions that may have been wrongly charged to your account. Leases often explicitly state certain expenses that the landlord cannot charge the tenants for. Check every item in your CAM/Operating expense header to ensure that they are not a part of your exclusion clause.

Though helpful, this checklist is just a starting point. A detailed CAM audit and reconciliation will identify any discrepancies that may exist across various areas and help you save significant amounts of money.

Rebolease.com, powered by RE BackOffice, Inc., is a premier provider of lease abstraction, administration, audit and accounting services. Headquartered in Pittsburgh, PA, we are a global boutique firm, providing high-quality services to top-tier clients across industry verticals, covering every type of lease and on any lease platform. We are proud to be a trusted partner, for 15+ years, to leading retailers, REITs, property owners/managers, and corporate accounts seeking a strategic advantage. All client projects are performed in-house.

Whether it is one clause, one amendment or a whole lease agreement, we can do it for you.

CAM audits, Lease abstraction, Lease Administration
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October 14, 2021
by ADMIN

Lease Administration post: Are you paying too much rent?

Rent is one of the key components of any lease. In fact, the rent roll is the core of any lease agreement. However, it can also be one of the most complicated elements. Sometimes, owing to its complexity, tenants may even end up paying more than what they owe. In this blog, we discuss what constitutes the key elements of the rent roll that tenants shouldn’t ignore.

Rent per square feet

If your rent is calculated per square foot, you need to ensure that the base of this calculation is correct–which is the leased space or sometimes referred to as square footage. Sometimes, even a minute error in lease square footage calculation can make a vast difference in the final amount that is levied on the tenant. This is especially true when the base rent, CAM charges, and other operating expenses are calculated on a per-square-foot basis. Learn more in this blog post

Any rent-rise indicators

If your rent hikes are pegged to any other economic indicators such as the Consumer Price Index (CPI), you need to ensure the data related to the indicator is accurate. Any changes resulting due to changes in the base price index need to be accounted for accurately and reflected in the rent roll.

What about CAM?

In net leases, CAM charges constitute a considerable chunk of your rent roll. Verifying CAM charges and ensuring the amounts levied are accurate is complex due to the nature of CAM elements. CAM includes multiple headers and complicated computations that often leave room for interpretation and also increase the chances of miscalculations. You need to be aware of the various components of your CAM charges and how they are computed for you as per your lease. For example,

What happens if you moved into a fairly empty building that’s only gradually filling up?
How is the CAM divided among the existing tenants including you, until the time there’s 100% occupancy?
What will be the repercussions on your CAM charges as new tenants are signed up.

As a tenant, it is very important to ensure that you have a solid understanding of your rent structure and the various elements that constitute your rent roll. It is also essential that you track them, consistently to ensure there are no errors, as errors that are embedded in the lease, year, or year can cost you dearly even impacting your key real-estate-related business decisions.

Two things that can help you in this regard are

Timely CAM audits by an experienced lease services provider who will scrutinize your invoices, CAM calculations, and other related charges levied by the landlord to identify any errors and have them rectified for you.
Accurate lease abstracts that simplify complex lease terms for you without diluting their essence so you understand your rent roll and related components clearly.

Rebolease.com, powered by RE BackOffice, Inc., is a premier provider of lease abstraction, administration, audit, and accounting services. Headquartered in Pittsburgh, PA, we are a global boutique firm, providing high-quality services to top-tier clients across industry verticals, covering every type of lease and on any lease platform. We are proud to be a trusted partner, for 15+ years, to leading retailers, REITs, property owners/managers, and corporate accounts seeking strategic advantage. All client projects are performed in-house

Whether it is one clause, one amendment, or a whole lease agreement, we can do it for you. Please contact us today to learn more.

CAM audits, Lease abstraction, Lease Administration
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October 6, 2021
by ADMIN

CAM Reconciliation: Should you outsource it?

Outsourcing your CAM audit and reconciliation tasks to an expert lease administration company helps you in many ways.

It keeps your costs low: This is one of the major benefits of outsourcing your CAM audit and reconciliation. You save on HR and training costs that you would incur if you hired someone for lease accounting and lease administration in-house.
Expertise: When you outsource your CAM reconciliation to a lease administration company, you benefit from their expertise. A lease administration company has vast experience across multiple industry types which you can leverage. Your in-house lease administrator may not have that kind of exposure and expertise.
Easier negotiations: If there are any discrepancies in your CAM calculations, the lease administration company to which you have outsourced the CAM reconciliation work will be the one getting in touch with your landlord. In general, this scenario is better accepted by Landlords, as the lease administration company comes across as a more reliable, third-party than your own internal team when reaching out to your Landlord. Plus, lease administration companies specialize in this kind of communication and usually have a process or protocol which is generally well-received by the other party.

***Whether it is one clause, one amendment, or a whole lease agreement, we can do it for you.* *Please contact us today to learn more.***

CAM audits, Lease abstraction, Lease Administration
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September 23, 2021
by ADMIN

Lease Administration post: Lease Audit Vs. CAM Audit: What’s the difference?

Both, lease audit and CAM audit are important functions in the process of lease portfolio management. Though used interchangeably sometimes, they actually refer to two different lease administration services. This blog discusses the difference between the two terms. Let’s begin by defining both of them.

Lease Audit

The term, Lease Audit refers to auditing of a lease abstract in the light of the original lease documents. Lease audits are usually performed when landlords or tenants already have the leases abstracted but wish to verify the accuracy of the lease abstracts. Some reasons for choosing to have a lease audit done could be because-

The lease abstracts are outdated. If the leases were amended or any addendums were made to them at a later date, you would want to ensure that the lease abstracts reflect the most recent information, which won’t be the case if the lease abstraction was done before the amendment/addendum was executed. In such scenarios, landlords or tenants have two choices–a) Get the Amendment/Addendum abstracted and added to their existing lease abstract or, b) Get the entire lease abstract audited and then updated to reflect the change due to the execution of the new amendment/addendum. Many opt for option b as it gives them the opportunity to confirm the accuracy of their existing lease abstracts.

Getting an experienced and trusted lease administration services provider to audit your leases can also help by bringing to light any instances where critical lease data may have been missed out. A lease administration services vendor with enough expertise and perspective into the lease abstraction process will also be able to identify any shortcomings in your original lease abstract template. They can help you make changes to your lease abstract template so it is more comprehensive and captures the lease information that matters to you, going forward.

CAM Audit

A CAM Audit, also known as the desktop audit is a lease administration process that involves reconciliation of account payables and receivables, mostly involving Common Area Maintenance (CAM) charges to ensure the tenant is not being undercharged or overcharged depending on who commissions the audit. Usually, CAM audits are commissioned by tenants. Here’s the reason why.

In the case of net leases, CAM charges are a core component of the rent roll. The thing about CAM charges is that it includes multiple headers and complicated calculations, which leave room for errors and even interpretation. Tenants need to be aware of the various components of their CAM charges and how they are computed as per their lease. For example, what happens if they move into a fairly empty building that’s only gradually filling up? How is the CAM divided among the existing tenants including them, until the time there’s 100% occupancy? What will be the repercussions on your CAM charges as new tenants are signed up.

When it comes to rent-roll calculations, the onus is always on the tenant to identify errors, if any, and report them to the landlord. So, tenants need to pay a lot of attention to the core rent roll components such as rent escalation calculations and CAM charges allocation. Overlooking any errors in these calculations will cause them to become a part of the base calculations for the next lease year which can prove very expensive for the tenant. Plus, most leases place a timeframe within which such discrepancies should be reported to the landlord. Failing to do so on time may be construed as acceptance by the tenant to make the payments. This is why most tenants commission regular CAM audits, usually, on an annual basis.

Whether you are a tenant or a landlord, when there is a vast lease portfolio that runs into hundreds of leases or more, CAM reconciliations figures can translate into significant cost savings.