Lease abstracts involve summarizing the key financial and non-financial information contained in your leases to ensure:
- You have quick access to critical information
- You can make the right business decisions regarding the property in question
- You have a clear understanding of even the most complex of lease terms
Generally, when we use the term, key lease data, the first thing that comes to mind is Rent. A lot of importance is attached to the rent roll and every lease abstractor focuses on getting that right. Tenants and landlords alike recognize the importance of getting the rent roll and its various elements summarized accurately. But there are other financial fields that are equally important and shouldn’t be taken lightly either. We are referring to options related to termination, renewal, expansion and the right of first refusal. These elements are extremely important from the tenant’s perspective because they can help you get a good deal on your existing lease. Here’s how it works-
- Termination options: These clauses deal with the choices the landlord and tenant have with respect to ending the lease contract at any time.
- Renewal options: These clauses deal with the choices the tenant has to renew the lease with the landlord upon completion of the lease term.
- Expansion or right to first refusal options often deal with the tenant’s right to being asked first in the event there’s a vacancy in the premises.
It is extremely important that, as a tenant, you are aware of these options in order to make timely strategic decisions for your business.
For example, if you end up finding a cheaper or a better location for your business, you may want to consider terminating your lease mid-term, even if it means paying penalties, because, in the long run, that may work out to be more profitable.
On the other hand, if your property is in a great location and you got a great deal on your rent increase terms, you may want to renew your lease after it finishes its initial term. In such a case, you certainly wouldn’t want to miss out on a chance to renew your lease just because you missed the notice period by 2 days!
Another example, let’s say the premises adjacent to yours is just what you need as your business grows, it will make sense for you to jump on the opportunity the moment it becomes vacant.
In order to do any of these things, there are various formalities involved such as notifying your landlord of your intention to terminate or renew within the stipulated time frame, a formal, written, expression of interest, etc.,
So, when we speak of getting the key terms right in your lease abstract, it is much more than the basic rent roll. All key dates must be identified at the time of lease abstraction and as a part of your lease administration process, those dates should be tracked, along with the necessary action items related to them so you can make the most of your leases.
RE BackOffice is a strategic partner providing end-to-end lease administration and accounting services, including lease audits. We offer scalable, affordable and accurate lease accounting and administration services to optimize your lease portfolio and related processes. Please contact us today to learn more.