Lease abstraction is a critical element of lease portfolio management. This blog discusses some of the basic questions related to lease abstraction and their answers.
What does lease abstraction mean?
The term, lease abstraction, refers to the process of extracting the key financial and non-financial data from a lease and summarizing it so it is meaningful and easy to understand. Lease information thus extracted is known as a lease abstract, since it provides an abstract version of the original lease.
Why have leases abstracted?
Leases have a lot of information and run into hundreds of pages. As a result, some critical information may be overlooked, which can result in a breach of contract of the lease and attract penalties, fines, premature lease termination and sometimes, even legal action. A lease abstract captures the essence of the lease and highlights the key financial and non-financial obligations ensuring they are not overlooked. Examples include:
- Rent amount due
- Date when rent is due
- Notice period for termination
- Notice period for lease renewals
- Rent increase dates, rent increase percentage, etc.
- Having abstracts of your leases allows you to stay on top of your lease portfolio and prevents any accidental oversight of lease obligations.
How to get leases abstracted?
If the next question on your mind is who prepares the lease abstracts or who typically abstracts leases, the answer is, a lease abstractor. A lease abstractor, also often referred to as a lease analyst usually does the lease abstraction. A lease analyst has a strong hold over the lease language and terms therein. Leases use a lot of legal terminology and not everyone is well versed in it to be able to decipher the actual meaning of the lengthy lease clauses. A lease analyst is also someone with a lot of experience in working with different lease administration software platforms.
What does a lease analyst do?
A lease analyst or a lease abstractor’s job can be split into 3 steps. The first is to read the leases, related amendments, addendums, side letters and any other document connected with the lease agreement thoroughly. The second step is to identify the key financial and non-financial elements of the lease and the third step is to capture them in a lease abstraction template or a lease administration platform, as requested by the client.
While the lease analyst will capture the key fields that are generally included in all lease abstracts as a norm, such as rent, commencement date and others, they may also include information about other clauses if the client requests them to do so.
Does everyone with a lease portfolio have a lease analyst for lease abstracting their leases?
Lease abstracts are a must if you want to stay on top of your lease portfolio. Retailers, corporate clients, REITs, property managers and property owners often require the services of not just one lease analyst but a whole team! This is because, their lease portfolio tends to be large with hundreds and sometimes thousands of leases spanning across different geographical locations. But, having a lease abstraction team in-house poses its own challenges, which is why a lot of them choose to outsource their lease abstraction and administration tasks to a trusted lease abstraction and administration vendor. This post tells you more about these challenges and how outsourcing lease abstraction is a viable solution.
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.