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Outsourcing lease abstraction & administration: What to consider?

Leases are critical business documents that drive key strategic decisions, and your lease abstracts help you make those decisions. While lease abstracts are the first step to staying on top of your lease portfolio management process, getting your leases abstracted and managed in-house can be challenging due to various reasons such as the high resource costs, lack of resources, tight timelines, etc. This blog discusses how signing up with a lease services vendor can help you overcome these challenges and, what are the key areas you need to focus on before you bring a lease services vendor on board.

Cost-efficiency

By working with a lease abstraction services vendor, you can save on costs that you would incur if you hired lease abstractors in-house, on your payroll. It helps you eliminate training, HR-related expenses and save on lease agreement interpretation and translation costs, as all of these are taken care of by the vendor.

Scale up or down easily

Signing up with a lease abstraction vendor helps you scale your lease abstraction resources up or down as per your needs, allowing tide-over temporary resource requirements. For example, at the time of major mergers and acquisitions, or renewals across multiple locations, bringing a lease abstraction vendor onboard is a more efficient way to handle your abstraction needs than hiring in-house.

Expertise

Vendors who provide lease abstraction services are specialized in what they do. It is their bread and butter, so they are naturally well-versed in the latest industry trends. They have more experience in handling multiple types of leases and tend to offer better accuracy, relevance, and compliance than in-house abstractors who comparatively have lesser exposure.

Improved turnaround time

Lease abstraction service vendors have a team of lease abstractors at their disposal, which means they won’t be overwhelmed by the volume of your lease abstraction project even if it runs into thousands of leases, and will be able to deliver your lease abstracts on time. Your in-house team may struggle to meet tight deadlines especially if it is a bigger project.

There are a lot of lease abstraction vendors in the market, but you want to make sure you pick one with the right amount of expertise, experience, industry knowledge, and reputation so your lease abstracts are accurate, concise, complete, and relevant to your business needs helping you make better operational and strategic decisions, consistently. Asking the following 6 questions might help you pick the right lease abstraction vendor.

Question-1: Do you perform all your projects in-house?

Did you know that often lease abstraction and admin vendors outsource their work to other agencies? You should be aware if your vendor also engages in similar subcontracting projects as it can affect you in 2 ways–

Data security and confidentiality: If your critical lease data is being shared with someone else, it can have serious consequences. Unless you are convinced of the data security measures adopted by your vendor and the sub-contractors, you can’t rest assured that your data is safe.
Possible delays: If your vendor is relying on someone else to do the actual work, any impediment on the subcontractor’s end will end up delaying your project and result in missed deadlines–something you cannot afford when dealing with critical time-bound, needs-based triggers like Due Diligence and acquisitions.

Question-2: How big and experienced is your team?

It is important that you ask your potential lease abstraction and administration vendor about their team strength and collective experience. These factors play a key role in the quantity and quality of output they deliver. One of the reasons why many organizations prefer to outsource their lease abstraction and administration processes is because of the scalability and flexibility they get by outsourcing. If your vendor doesn’t have enough staff strength to scale up with you during times of resource shortage, or when you have an exceptionally higher load of leases due to factors such as an acquisition, merger or new outlets opening, then you fail to leverage a key benefit of outsourcing.

At the same time, be sure to ask about the overall team experience, as this has a direct impact on the quality of output and also on its quantity. An experienced team will be able to deliver high-quality output in a relatively shorter timeframe.

Question-3: Will you collaborate with our other stakeholders?

For the lease administration process to be effective, often, the lease administrators will have to get in touch with others in the legal or accounting functions of the landlord or tenant’s business. This is especially true in case of recurring lease administration tasks such as reconciliations, collections, etc., You may even have an in-house lease admin team with whom your vendor may have to collaborate often. Having a lease administration vendor who can do the liasioning for you will make the entire process more efficient and you will be spared the hassle of multiple emails and calls to collaborate with different stakeholders across the country or even the globe, if you have an international presence.

Question-4: Can you give us client references?

Ask your potential lease abstraction and administration vendors for client references. When outsourcing a process as important as lease portfolio management, you want to make sure that your vendors truly place great emphasis on customer delight and creating positive customer experiences. One of the ways to verify that is by asking for client references and testimonials. It is even better if the clients are from your industry.

Question-5: What about client support?

Ask your vendor about their client support set up. Do they offer 24h client support? Are they available on all working days of the week? What about the point-of-contact? Will they offer you a single point-of-contact throughout the course of your project? This becomes especially crucial when you have offices operating from different parts of the world. Having a single project manager to handle your lease portfolio can make the process more fluid, transparent and efficient.

Question-6: Can you customize your service offerings?

When it comes to lease portfolio management, every client, every industry is different and the one-size-fits-all service model won’t work well. For an outsourced lease portfolio management process to work well, it is important that your vendor caters to your industry-specific needs and customizes their service offering to meet them effectively.

Make sure you don’t entrust your leases to a random fly-by-night start up that’s here today, gone tomorrow. Trusting such vendors with your critical lease data is not a good idea from the data security standpoint. Plus, you need a lease administration and abstraction vendor who can be a trusted partner and help you scale, as your lease support service needs grow or decline. While a newly found startup may be cheap, they usually do not have

The resources to support your lease needs as you grow
Stringent data security measures and may end exposing your critical lease data to risks of data theft and loss
The expertise and experience needed to handle complex lease data

Leases are critical business documents that are also confidential and legally binding. You don’t want your leases getting into the wrong hands! Make sure you partner with a lease support service provider with years of industry presence and experience that is trusted by your peers.

What is a lease management system?

A lease management system, also referred to as lease administration software or lease administration platform, is a software program that allows users to manage their lease portfolio efficiently.

What are lease management systems used for?

Lease management systems are used to store, retrieve and monitor key lease data. Lease management systems are widely used by businesses and entities that have lease portfolios that need to be managed. This includes, retailers, corporate, REITs, real estate brokers, property managers, owners and other similar entities. If, as a business, you have just one or two leases, you probably don’t need a lease management system. A good lease abstract summarizing the key financial and non-financial information from those few leases onto a spreadsheet is probably enough. But, on the other hand, if you are an organization with presence across multiple locations, then, along with lease abstracts, a lease management system is a must to stay on top of your lease portfolio.

What are the key benefits of a lease management system?

Lease management systems can help you

Meet the compliance requirements as per lease accounting standards such as FASB ASC 842, IFRS 16 and GASB 87
Get a 360-degree view of your lease portfolio and all the lease agreements therein. This plays a key role in helping you make the right business decisions in relation to your lease portfolio. Examples include decisions that affect lease profitability and ROI including renewals, terminations and subleasing.
Have a single, standardized repository for all lease documents, which can be accessed by all relevant departments throughout the organization.
Get better lease insights through multiple dashboard, summary and reporting modules, addressing the lease data needs of different departments effectively.
Stay on top of your lease portfolio by generating alerts and notifications for critical events such as notices, expiration dates, invoice due dates, renewals and other obligations. This helps ensure that you don’t miss any critical dates. Missing critical dates can have serious consequences, such as penalties or even lease termination.
Keep your payment schedules on-track and accurate. They allow you to effectively manage your lease-related expenses and payments such as regular rental payments, percentage rent calculations, Common Area Maintenance (CAM) charges and reconciliations.

Lease management systems are indispensable if you have a lease portfolio consisting of multiple leases. But a lease management system alone isn’t enough. You need accurate lease abstracts of all the leases in your lease portfolio and also an experienced lease administration partner who can help you optimize your lease administration software so you get the best ROI.

Learn more about the top lease management systems of 2022 here!

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.

7 ways to make your lease administration function more efficient

Lease administration is a critical business function as it plays a key role in helping organizations stay on top of their lease portfolios. The goal is to reduce the risk of missing critical dates and payments and meet all legal and regulatory requirements as far as the leases are concerned. This blog discusses 7 ways to make your lease administration function more efficient.

Accurate lease abstracts

Lease abstraction is the process of extracting critical data which involves obligations. Your lease administrators rely on the abstracts of your leases. Lease abstracts provide a quick overview of the key financial and non-financial clauses of your lease. If your lease abstracts are inaccurate or fail to capture critical information, your lease administration won’t be efficient or accurate. The end result could be monetary losses running into thousands of dollars.

Full compliance with lease accounting standards

The recent accounting standards mandate the abstraction of additional data points, which may mean that leases need to be abstracted again. If you don’t have the resources for this one-time re-abstraction of your leases, your lease administration function will be affected. Additionally, non-compliance will attract penalties.

Have a strong lease administration process in place and evaluate it from time to time

Developing and implementing an effective lease administration process is important for the successful functioning of the lease administration department. Equally important is the consistent evaluation of the processes. This exercise is important to ensure the steps involved are not redundant and are producing the desired results without losing any critical information.

Invest in the lease administration software that’s right for you

Investing in a lease administration software is a must to stay on top of your lease portfolio and for efficient ongoing lease management. While there’s no doubt that lease administration software programs are indispensable, things start to get a little tricky when it comes to selecting a lease administration software.

Click here to learn more about the top 10 lease administration software programs of 2022.

Hire the right people!

Lease administration is an important process helping you stay on top of your lease portfolios. Typically, when we come across the term, lease administration, one of the first things that comes to mind is Common Area Maintenance (CAM) audit and reconciliation. However there’s a lot more to the lease administration process than just CAM reconciliation and lease audits. While CAM reconciliation is one the core tasks and most time-consuming, there are other equally important processes that are a part of lease administration. Outsourcing your lease administration process or looking to hire a lease administrator? Make sure your new lease administrators are adept at all of the above services and not just CAM!

Have lease translators on board, if need be

If you are a retailer with a lease portfolio that extends beyond the US borders, you also need to consider using ther services of a lease translator. Global lease abstraction projects require robust language translation capabilities and the ability to understand the various regional nuances. For example, not all English leases are the same. There will be differences in the language and their interpretation from region to region, such as between the US and UK. So, while the language is the same (English), regional nuances and knowledge of the legal terminologies pertinent to the country come into play when abstracting the lease.

La team isn’t siloed

Lease administration team’s role has broadened considerably as a result of the additional tasks that previously fell under the purview of the legal, accounting, and finance department. But to accomplish these additional tasks, there is a need for transparency and coordination between the lease administration department and all other departments. A lease administration team that works closely with these other departments will be much more efficient and effective than one working in silo

Tracking down your commercial lease agreements

Irrespective of the size of your organization, if you are leasing commercial space (Office/retail/other non-residential spaces such as warehouse or even Kiosks), you would be having lease agreements for those. Most likely, you will be also having equipment leases pertaining to office equipment that you may have leased. While organizations realize the importance of lease agreements, these agreements are sometimes all over the place, making it really difficult for the organization to stay on top of their lease portfolio. This blog discusses the starting point for lease portfolio management–getting all the lease agreements together.

Start with your purchase orders

Does your organization require a purchase order to be approved before any significant financial transaction? If yes, then all your leases may have purchase orders released for them too. Check with your invoicing/purchase department and see if they can share all lease-related purchase orders with you. This will help you arrive at a count in terms of the number of leases you have, irrespective of the lease type.

Ask your legal team

Leases are legal documents. So, if you have an in-house legal team, chances are, they have a copy of all your leases. Usually, legal departments use contract management platforms to store all contracts and they will be able to get you a copy of all your leases almost instantly through their software.

Check with your accounting department

Your accounting department is bound to have all the information on your leases. Especially with the new FASB and GASB regulations, they have to meet the mandatory lease reporting requirements, which means that they will be having access to all the lease agreements and related documents. Most likely they will be having a copy of your lease agreements in their accounting platform and just like legal, would be able to pull it out for you fairly quickly.

Lease management or lease administration software platforms

Once you have all your lease agreements together, the next step is to ensure that they are stored in a centralized repository, so the lease data is not in silos. The challenge with not having a centralized lease storage repository is that each department or team stores the lease data in the format and location they want it in. This can include accounting platforms, legal document management software, asset management software, invoicing tools and even spreadsheets. Not only is this situation chaotic and prone to errors, it also means that no one throughout the organization has a 360-degree view of the lease agreement. A 360-degree view of of the lease agreement is extremely important as it plays a key role in driving business decisions related to the lease that affect the lease profitability including renewals, terminations and subleasing. Investing in a robust lease management software can help resolve this challenge by offering a single, standardized repository for all lease documents, which can be accessed by all relevant departments throughout the organization. Plus, such lease management software platforms come with multiple dashboard, summary and reporting modules, addressing the lease data needs of different departments effectively.

Lease administration software platforms have the ability to generate alerts and notifications for critical events such as notices, expiration dates, invoice due dates, renewals and other obligations. This helps ensure that you don’t miss any critical dates. Missing critical dates can have serious consequences, such as penalties or even lease termination. Lease administration software platforms help ensure your payment schedules are on-track and accurate. They allow you to effectively manage your lease-related expenses and payments such as regular rental payments, percentage rent calculations, Common Area Maintenance (CAM) charges and reconciliations.

Lease administration software platforms are now also equipped with the required mechanisms to help you meet the FASB/GASB and ASC 48 compliance requirements.

Investing in a good lease administration software platform is a must to stay on top of your lease portfolio. But that isn’t enough. You need to have an experienced lease administration partner who can help you optimize your lease administration software so you get the best ROI.

Considering investing in a lease management system? Check out our post on the Top 10 Lease Administration Software Platforms for 2022, first!

5 ways to leverage better ROI on your lease portfolio

Commercial real estate leases are high value and complex. When your lease portfolio contains multiple commercial real estate leases spread across different locations, it becomes all the more challenging to stay on top of it. As a result, sometimes, tenants tend to overlook some seemingly small, yet big-impact items that can have significant effect on their lease ROI. This blog discusses 5 such elements and how staying on top of them will help tenants save money on their leases.

CAM Audits

CAM or common area maintenance charges are an important element of the rent roll in your lease. As the name signifies, CAM charges refer to the expenses incurred by the Landlord on account of maintaining the common areas of the leased premises. Since these areas are common and shared by all tenants, landlords usually split the common area expenses amongst all the tenants. CAM overpayments are not uncommon–in the case of tenants with large lease portfolios characterized by multilingual leases or leases spread across multiple locations. Keeping track of their lease expenses across hundreds or even thousands of leases spanning across multiple locations is tricky. CAM audits and reconciliations by a reputed lease administration services provider can help you save hundreds of thousands of dollars annually.

Staying on top of renewals

Renewal is the option to extend the term of the lease after the expiration of the existing lease term. Renewal clauses give the tenant the right to extend the lease term for a specified period of time and at a pre-defined rental rate. However, for the renewal to take effect, the tenant has to provide a notice to the landlord within the time frame specified in the lease. Sometimes, leases have automatic renewal clauses in which case, the lease automatically renews for the next term at a said rental rate if the tenant doesn’t provide a notice to terminate it. In both cases, as we can see, there’s a need to provide notice to the landlord within a stipulated period before the existing lease term expires. Missing out on exercising a lease renewal that is economically viable or renewing a lease that is performing poorly in terms of ROI are both not ideal situations. So, your lease administrators should track such critical dates and ensure the notice requirements are taken care of in either scenario.

Not missing rent payments

Paying your rent on time is also very important as missing your rent payment date can result in heavy financial penalties.

Ensuring the rent increase stipulated by the landlord is accurate

When your landlord increases you rent, before you pay the updated amount, do have your lease administration team review all lease clauses related to rent increase and confirm if the rent amount increase specified by the landlord is correct.

Do your research and negotiate with the landlord before renewing your lease

Never renew your lease in haste! Do your homework first, so you can negotiate better terms with your landlord. For example, if you find comparable premises in your area are priced less in terms of rent or have better amenities or other perks, you can negotiate with the landlord for a better deal such as reduced rent or ask them to provide you with Tenant Improvement (TI) allowance.

The 5 points we discussed above seem pretty easy to implement, right? But, it can be challenging if you have a large lease portfolio encompassing hundreds or thousands of different lease locations. Consider outsourcing your day-to-day lease administration to an experienced lease administration vendor who can help you track critical dates, verify the charges levied upon you by your landlord and ensure you stay on top of your lease portfolio, always.

Lease Renewals: Where to start and how to go about them

Lease renewal clauses are very important for tenants in the sense that they provide them the opportunity to continue with a profitable lease or to exit out of an unprofitable one. This blog focuses on certain metrics tenants should consider before renewing a lease.

The renewal clause

This is the obvious starting point when analyzing your lease’s viability in terms of renewal. Does your lease have a renewal clause? What does it say exactly. In most cases, if you intend to renew your lease, as a tenant, you will have to provide the landlord with a notice expressing your intent to renew the lease. Your lease will usually also stipulate a timeframe within which the notice is to be provided and such notice is usually a couple of months or days prior to the expiration of the then current lease term. In some cases the renewal clause may also mention the rent for the new term, that you would owe the landlord and the duration of the next lease term should you choose to renew the lease.

Sometimes, leases have automatic renewal clauses in which case, the lease automatically renews for the next term at a said rental rate if the tenant doesn’t provide a notice to terminate it. In both cases, as we can see, there’s a need to provide notice to the landlord within a stipulated period before the existing lease term expires.

So, as a tenant, it is important to peruse the renewal clause of your lease agreement thoroughly and also be alert and keep an eye out for the notice period and key dates, so you don’t miss out on a good deal by failing to renew a profitable lease on time.

Do your research

The next then to consider is, whether the lease agreement is worth renewing in the first place. When trying to determine this, ask the following questions to –

Is the location of the property beneficial to you? Is it specifically helping in bringing in clients (if you are a office/professional service provider) or increasing sales revenue (if you are in retail)
Are you getting any special benefits (eg. Governmental grants, tax credits) because you are operating your business in the particular leased premises?
At what rental rates are other similar, comparable properties in the vicinity priced? An in-depth comparative analysis will help you understand if you are being charged fair rental rates by your landlord and will also help you negotiate your rent for the upcoming term, should you decide to renew your lease
Are there other, similar properties available for lease in and around your current leased premises? If yes, then you should spend some time checking them out, do a bit of quote shopping and understand the pros and cons of the available options.

Doing your research will not only help you make the right decision with respect to lease renewals, but it will also help you negotiate better terms with your landlord. For example, if you find comparable premises in your area are priced less in terms of rent or have better amenities or other perks, you can negotiate with the landlord for a better deal such as reduced rent or ask them to provide you with Tenant Improvement (TI) allowance.

Have a strong lease administration process

While the boxes to check in this checklist for lease renewal may seem pretty straightforward, it becomes complicated when you have a large lease portfolio. When you have thousands or even hundreds of leases with different renewal dates and varying terms and conditions, it can get overwhelming. If that sounds familiar, you should reach out to a trusted lease support service provider who can take care of this for you. A lease administration services provider will have a large team of experienced lease administrators who can help you stay on top of your lease portfolio irrespective of its size.

Also, make sure you invest in a lease administration software platform which captures important dates such as the last date for exercising lease renewal options, and also generates alerts in a timely manner so you have the time to think through, calculate and take a well-informed decision regarding the renewal.