Leasing is a key financial decision, so it is fair to assume that tenants analyze the viability of the decision to enter into a lease, thoroughly. However, once the lease is signed and the rented premises are occupied and operational, many tenants are taken by surprise as they find their rental costs ending up being significantly more than what was expected. This blog post discusses the possible reasons for such discrepancies.
One of the first things to check is if your base rent calculations are accurate. If there are errors in your base rent calculations, they can get embedded in your rent roll, pushing your rent higher year-after-year, inaccurately. Some areas to check in this regard are-
Square footage calculations
Leased space or square footage plays an important role because it forms the base for most of the charges levied upon the tenant. Even a few square feet here and there can make a huge difference when base rent, CAM charges, and other operating expenses are calculated on a per-square-foot basis. Learn more in this blog post.
CPI calculations
If your rent rises are linked to the CPI, then you need to ensure the CPI calculations made for your lease are accurate. You need to be aware of the CPI adjustments and apply them correctly to your rent roll.
Rent commencement date, pro-rata rent, and term calculations
Another area to scrutinize is the rent commencement date. A lot of hinges upon your rent commencement date, including calculations related to your lease tenure. If your rent commencement dates are incorrect, or the terms and pro-rated rent are calculated wrong, you may be paying more than what you actually owe.
You can avoid unpleasant surprises related to your rent amounts by deploying the services of an experienced lease administration firm that helps you stay on top of your lease portfolio management. Regular lease audits and lease administration services go a long way in identifying errors in your rent roll and helping you save significantly on rent.