Lease abstracts are the backbone of your lease portfolio process. Abstracting your leases in-houses and staying on top of them always as amendments and addendums are signed, can be challenging. While outsourcing your lease abstraction process to a trusted lease abstraction service provider is a great idea, there are a few things to consider when doing so.
Learn More in our recent video.
You know the importance of staying on top of your lease portfolio, which is why you have abstracts of all your leases. However, keeping your lease portfolio updated is an ongoing activity and not a one-time project. Over the years, there are bound to be updates and changes (amendments and addendums) to your existing leases that need to be carefully reviewed and captured in your lease abstracts. The need to stay up-to-date on lease amendments came to light during the peak of the COVID-19 pandemic last year, when a lot of retail tenants had to quickly explore the options in their leases that offered them some respite as their finances hit rock bottom due to lockdowns and shelter-in-place restrictions brought on by the pandemic.
But what’s the best way to ensure your lease abstracts reflect the latest amendments and addendums? Even if you already have an in-house lease administration team, they would be too busy managing your lease portfolio on an ongoing basis. Diverting their time and energy to something as mundane as amendment abstraction and updates doesn’t make sense. Plus, amendment abstraction is a one-time project. You won’t need to do it again until you sign new amendments, so bringing new staff on board to handle the temporary assignment is not viable either.
Hence it makes sense to outsource your amendment abstraction work to a trusted lease abstraction vendor. Amendment abstraction goes beyond just scrutinizing amendments and addendums and extracting key information out of them. Amendment abstraction may involve going through any supplementary document such as side letters, email correspondences, notices, etc., that may impact the key terms of your lease. An experienced lease abstraction vendor will be able to identify these key elements, summarize them and enter those into your lease management system to ensure your records are up-to-date.
Outsourcing amendment abstraction offers you an extra hand to update your lease management system with all the changes included in your newly executed amendments, abatements, or deferral clauses and speeds up the process while allowing your in-house lease management team to focus on the more important lease administration activities.
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.
Real estate taxes are one of the most common elements of operating expenses that the landlord passes on to tenants. However, did you know that you could be paying much more than your actual share of real estate taxes for the premises you leased? In our blog this week, we talk about four kinds of mistakes your landlord could be making as a result of which you may be ending up paying more than what you owe.
When the landlord levies property taxes on tenants as per their pro-rata share, they should also credit any tax refunds received to the tenants’ accounts accordingly. However, sometimes, landlords may fail to credit the tax refunds or make errors in refund pro-rata calculations that tenants need to watch out for.
The landlord must assess the taxes levied upon them every year to ensure they are in accordance with the local real estate laws. Tax certiorari allows landlords to challenge the real estate tax amount levied upon them. However, many landlords may overlook this step as they know their tenants will share the tax load anyway as per the lease agreements.
Landlords may erroneously include their personal taxes such as the tax on personal property or tax on income from a rental property in the real estate tax calculations for the leased premises, thus passing it on to their tenants.
Your landlord may incorrectly bill you for the expenses they incur when they hire a tax professional to work out their real estate taxes. While, as a tenant, you may be obligated to pay your share of the real estate tax as stipulated in your lease, the clause most likely won’t cover tax professional’s fees, which means, sharing the fee as a part of the tax pass-throughs would be incorrect.
Tax pass-throughs are just one of the many items in operating expenses that need to be audited by tenants to ensure they are not being overcharged. A lease audit that covers all elements of CAM charges and operating expenses is a must on an annual basis to ensure you, as a tenant, don’t pay more than what’s due.
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. Please contact us today to learn more.
The ASC 842 regulations bring a lot of changes to the way leases are treated in financial statements and books of accounts. In this blog, we outline the key challenges businesses face when embarking on their FASB compliance journey.
While businesses know compliance with the updated FASB regulations entails having to reassess their books of accounts, many tend to underestimate the scope of work. There is a feeling that they have all the data they need and it is just a matter of restructuring it to suit the ASC 842 regulations. However, the ASC 842 regulations require a lot more than just data restructuring and the compliance process is much more time-consuming and labor-intensive than accounted for. As companies get started with the compliance process, they realize that they were mistaken. A lot of them struggle with data in complex spreadsheets that make it difficult to make sense of the vast amount of information contained therein.
Even businesses that have lease management systems in place find that sometimes they are not on top of their lease portfolios and the information in their lease abstracts is outdated and virtually useless. Also, the FASB regulations have brought about changes to the typical lease abstract templates by adding to the data points, making it necessary to include new information to the existing lease abstracts. These data points sometimes do not even exist in the original lease. They may be in the form of email communication, side letters, and other correspondence, which may have not been considered at the time or original abstraction.
As discussed above, making your lease abstracts meaningful from the FASB compliance perspective entails a significant lease abstraction template redefinition–something that only an experienced lease abstraction vendor, with in-depth knowledge, perspective, and expertise into the lease abstraction process will be able to offer.
The FASB compliance process comes with a definite timeline that needs to be adhered to. Also, after you get your leases in order and update your lease abstracts to reflect the information you need for your books of accounts, you should still consistently audit and update your lease abstracts at regular intervals to ensure you stay compliant.
Bringing a trusted lease abstraction services provider on board can help you mitigate all these challenges effectively, efficiently, and meet your compliance requirements on time.
Rebolease.com, powered by RE BackOffice, Inc., is a premier provider of lease abstraction, administration, 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. Please contact us today to learn more.
Consistent lease administration can help you stay on top of your lease portfolio and make the right business decisions. This is especially true at the time of renewals. Lease administration helps you stay up-to-date in terms of key lease terms and dates. If you don’t have a consistent lease administration process in place, you may be caught off guard as your lease becomes due for renewal and you will have no choice but to renew your lease on the Landlord’s terms and conditions, in the interest of time.
On the other hand, if you have a solid lease administration process, you will be alerted to critical dates and clauses consistently and that will give you ample time to weigh your options and make the right business decisions. For example, you can plan a few months or even years ahead of lease expiration and enter into negotiations or amendments with your landlord. Being aware of your lease expiration dates well in advance also allows you to scope the real estate market for better options. Apart from helping you make the right renewal decisions, consistent lease administration also helps you stay on top of things when it comes to expansions. It draws your attention to the various rights you have in the event property in your premises becomes vacant. For example, the right of first refusal or the right of the first offer, etc.
Lease administration also helps you avoid penalties and other charges by keeping tabs on upcoming rental obligations. Similarly, it also ensures any other invoices raised by the landlord are accurate and paid off on time. From the CAM and operating expense perspective, a lease administration process that involves reconciliation of account payables and receivables and auditing, thus ensuring you are not being overcharged. When you have a lease portfolio that runs into hundreds of leases or more, these figures can translate into significant cost savings.
Here’s a case study that discusses how America’s leading mid-sized retailers of the largest communication brands save more than $140,000 annually with effective and efficient Lease Administration services.
Rebolease.com, powered by RE BackOffice, Inc., is a premier provider of lease abstraction, administration, 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. Please contact us today to learn more.
Outsourcing your lease abstraction project is a big business decision and you want to make sure you do it right. In our blog this week, we discuss a few key criteria that you should consider when hiring a lease abstraction vendor.
Experience
This is one of the most important considerations because a lease abstraction firm that’s backed by years of experience will most likely be fulfilling the other criteria that follow. But, apart from the number of years the lease abstraction vendor has been in the business, also consider their experience in working with tenants and landlords. This angle is important because leases are complex legal documents and a lease abstraction vendor who has experience working with lessors and lessees over the years has a much broader perspective than someone who has been typically involved only with one of them. Another factor to consider is their experience with leases of your industry.
(Learn more about this criteria in our blog, What to consider when assessing your lease abstraction vendor’s experience?)
References
Ask your lease abstraction vendor for references. No matter how big or small, always ask them to provide you with client references. Reaching out to their former/current clients will provide you with the insight you need to make a decision. It will also shed light on their ties with clients and the quality of their client services process.
Expertise
You know how important it is to maintain 100% accuracy when it comes to lease abstracts, and you should demand no less from your lease abstraction vendor. Also, remember that the lease abstract template they use matters a lot. The template becomes the backbone of the abstraction project, simplifying the complexity and scaling to manage the volume of leases in a portfolio. Your core business focus area is not lease. Your lease abstraction vendor should have enough expertise and experience to suggest the lease abstraction template that’s right for you. If your existing lease abstract templates fail to capture critical information, your lease abstraction vendor must be able to catch that and fix it. They should be able to guide you through the process of streamlining and designing optimal lease abstraction templates. Our blog post, Is your lease abstraction set up accurate, offers more information on this.
Accurate and timely lease abstracts are a must to stay on top of your lease portfolio management process and picking the right vendor will help you make better operational and strategic decisions; accurately, consistently, and fully.
Rebolease.com, powered by RE BackOffice, Inc., is a premier provider of lease abstraction, administration, 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. Please contact us today to learn more.
