Blog

rebackoffice

What is Lease Abstraction?

 

Lease abstraction is a vital commercial real estate lease management process, which involves extracting key data points from lease agreements and organizing them in a summarized format for easy reference. Lease abstraction streamlines lease data management and enhances the efficiency of the lease portfolio management process.

Essentially, lease abstraction involves analyzing the lease agreement and identifying crucial financial and non-financial information such as lease term, rent amount, renewal options, key tenant obligations, and landlord responsibilities. This data is then organized into a standardized format that can be easily accessed and searched.

The main benefit of lease abstraction is that it saves time.  Instead of having to read through a long and complex lease agreement every time a lease-related question arises, lease administrators can quickly refer to the abstract for answers. This makes it easier to manage large lease portfolios consisting of hundreds or even thousands of leases simultaneously and ensures that nothing important, such as payment due dates, lease renewal date, notices, etc., are not overlooked.

In addition, lease abstraction can help to identify areas of risk or opportunity within a lease. For example, it may reveal that a tenant has an option to renew the lease at a below-market rate, allowing them to plan accordingly. Similarly, it may highlight areas where a lease is particularly restrictive or onerous, providing an opportunity for renegotiation.

Overall, lease abstraction is a valuable tool for managing commercial real estate lease portfolios. By streamlining the lease management process, it allows tenants and landlords to make more informed decisions.

Outsourcing lease abstraction to an experienced lease abstraction service provider

For entities that have a large lease portfolio to manage and limited lease administration resources, outsourcing lease abstraction to an experienced lease abstraction company is an excellent solution. 

  • Accuracy and Consistency: Professional lease abstraction companies use skilled lease analysts with expertise in legal language to ensure that all lease data is accurate and consistent across all leases.
  • Time and Cost Savings: Outsourcing lease abstraction to a trusted lease abstraction vendor can save a significant amount of time and money by eliminating the need for in-house staff to manually review and abstract leases.
  • Increased Efficiency: Global lease abstraction companies use advanced technology such as LeaseAi to extract and store lease data, providing clients with quick access to lease information.
  • Risk Mitigation: Outsourcing lease abstraction to leading lease abstraction service providers with experienced lease analysts helps to mitigate the risk of errors and omissions, which can result in costly legal disputes and lost revenue.
  • Flexibility and Scalability: Outsourcing lease abstraction to a comprehensive lease abstraction service provider allows businesses to scale up or down quickly based on their needs, without the need to hire or lay off staff.

Overall, outsourcing lease abstraction can provide businesses with significant cost savings, improved accuracy and efficiency, and risk mitigation, while allowing them to focus on their core competencies.

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 17+ years, to leading retailers, REITs, property owners/managers, and corporate accounts seeking a strategic advantage. All client projects are performed in-house.

The importance of CAM Reconciliation for Tenants

 

Common Area Maintenance or CAM reconciliation is a part of the lease administration process that is critical for tenants because it ensures that they are only paying their fair share of CAM fees. This process compares the estimated CAM fees that tenants paid throughout the year to the actual expenses incurred by the landlord or property manager. At the beginning of the year, landlords or property managers will estimate the CAM fees for the upcoming year based on the expected expenses for maintaining and operating common areas. Tenants will make payments towards the estimated CAM fees throughout the year. At the end of the year, the actual expenses incurred by the landlord or property manager will be compared to the estimated CAM fees paid by tenants. The difference between the estimated and actual costs is then reconciled, and tenants are either credited or debited the difference. If the estimated fees were higher than the actual expenses, tenants will receive a credit, which can be applied to future CAM payments. If the actual expenses were higher than the estimated fees, tenants will be debited the difference, and they will be required to pay the additional amount.

Here are some key to-dos for tenants when it comes to CAM reconciliation:

  • Understand your lease agreement: Before signing a lease, it’s important to review the CAM clause carefully to understand how the CAM charges are calculated. Having a clear understanding of the CAM charges computation is the first step in ensuring that you are not overpaying your landlord or property manager. 
  • Keep track of payments: It’s crucial to keep track of all payments made towards CAM fees throughout the year. This helps ensure you don’t miss any critical deadlines that can cause a penalty to be imposed upon you. Also, keeping track of the payments made ensures that you have all the proof of payment (receipts) handy when it is time to verify your actual payments against the ones indicated in your landlord or property manager’s CAM statement. 
  • Review the reconciliation statement: Naturally, as a tenant, you should review the CAM reconciliation statement shared with you by your landlord or property manager to ensure that you are being charged for only what you owe and not more. 

Now let’s dive into the benefits of CAM reconciliation for tenants:

Cost savings: CAM reconciliation ensures that tenants only pay their fair share of CAM fees. If the estimated fees were higher than the actual expenses, and the tenants paid the estimated CAM charges, the excess amount paid by the tenants will be refunded to them by the landlord or property managers. 

Transparency: The reconciliation process provides transparency into how CAM fees are calculated and how they are being used to maintain and operate common areas in a property. This can help tenants to understand the value they are receiving for their CAM fees.

Accuracy: CAM reconciliation ensures that the charges are accurate, which can help to prevent disputes between tenants and landlords or property managers.

In conclusion, CAM reconciliation is an essential process for tenants to understand. By understanding how CAM fees are calculated and reconciled, tenants can ensure that they are only paying their fair share of expenses related to common areas in a property. By keeping track of payments, reviewing the reconciliation statement, and asking questions when needed, tenants can feel confident that they are being charged accurately and fairly.

Are you a retail tenant?

You may be paying your Landlord way more than what you owe!

RE BackOffice helps retail tenants save hundreds of thousands of dollars every year through accurate CAM

audit and reconciliation services.

As a part of our CAM Audit services, we offer–

  • CAM charges reconciliation
  • Insurance charges reconciliation
  • Invoice processing and audits
  • Real Estate Taxes reconciliation
  • Follow-ups with landlords to correct overcharging

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 17+ years, to leading retailers, REITs, property owners/managers, and corporate accounts seeking a strategic advantage. All client projects are performed in-house.

Lease Administration: Understanding the Basics and Best Practices

 

Lease administration is the process of monitoring and managing lease agreements to ensure all critical obligations, especially, financial, are fulfilled in a timely and accurate manner. Examples include rent payments, lease renewal, notice requirements, compliance management, etc. This blog discusses lease administration from a tenant’s perspective and the various elements that are a part of it.

Key Elements of Lease Administration

Lease Abstraction: Lease abstraction is the process of summarizing critical financial and non-financial data from lease agreements. Examples include lease terms, rent amounts, renewal options, key dates, etc. Lease abstraction is the first step in the lease administration process as it provides easy access to key lease data which is very important for on-going lease administration.

Managing rent payments: As a tenant, it is important to ensure that you make your rent payments on time and are aware of any late fees or penalties. Lease administration involves managing rent payments, which includes tracking rent payment due dates, having payment reminders and ensuring the rent is paid on time so as to avoid any penalties such as late payment charges. Your lease administration team is also is responsible for reviewing the lease clauses related to rent increases and confirm if the rent amount increases specified by the landlord is correct and process the payment if it is accurate while contesting it if the landlord’s calculations are not accurate. 

CAM Reconciliation: Common area maintenance (CAM) reconciliation is perhaps one of hte most crucial lease administration tasks. CAM charges refer to the costs associated with maintaining and operating shared spaces of the rented property, such as lobbies, elevators, parking lots, and common areas in multi-tenant buildings. However, CAM charges are not fixed and can vary from year to year, based on actual expenses incurred. This is where CAM reconciliation comes in – it is a process that ensures that tenants only pay their fair share of the CAM expenses, based on the actual costs incurred by the landlord. CAM reconciliation is considered as a significant element of the lease administration process as it serves as an important tool for maximizing lease portfolio savings.

Lease Renewal: 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. 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. As a tenant, it is important to be aware of the lease renewal process and any changes to lease terms that may occur. Lease renewal is an essential part of lease administration.

Estoppel certificate processing: An estoppel certificate is a legal document that outlines the key terms and conditions of a tenant’s lease agreement and confirms that the information provided is accurate and true to the best of their knowledge. It is typically used by landlords in discussions with potential buyers or lenders seeking to secure a loan with interest in the property. The responsibility of creating estoppel certificates usually falls on the tenant. Tenants are typically given a window of 10-20 days to submit the estoppel certificate to their landlord, and the lease administrators within the tenant’s organization are responsible for processing the estoppel notice promptly.

Security deposit management: As a guarantee for fulfilling lease obligations, tenants pay a lump sum amount known as a security deposit to their landlords, which is usually refundable at the end of the lease term, assuming the property remains undamaged and all lease obligations are fulfilled. It is the landlord’s responsibility to return the security deposit within the timeframe specified in the lease, and failure to do so may result in the landlord being liable to pay a penalty to the tenant. It is your lease administration team’s job to follow-up with your landlord to ensure that your security deposit amount is received on time and is accurate. 

Commencement date letters: The management of commencement dates and rent commencement dates are critical tasks for lease administrators. Tenant lease administrators are responsible for reviewing the lease commencement letters received from landlords and ensuring the information therein is accurate. They are also responsible for updating the information in the lease administration software platform of the tenant. 

Liasoning services: Liasoning with the /landlord/other parties for lease-related processes and ensuring such processes run smoothly and are taken care of on time is also an important element of lease administration.

Outsourcing lease administration can be an excellent option for tenants who do not have the time or resources to manage their growing lease portfolio effectively. By outsourcing, they can benefit from the expertise of experienced lease administration service vendors who have the knowledge and tools needed to efficiently manage large lease portfolios. Outsourcing can also reduce the risk of errors and ensure compliance with lease agreements, saving time and money in the long run. 

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 17+ years, to leading retailers, REITs, property owners/managers, and corporate accounts seeking a strategic advantage. All client projects are performed in-house.

Whether it is one clause, one amendment or a whole lease agreement, we can do it for you.

Optimizing your lease abstraction process for maximum accuracy and efficiency

 

Lease abstraction is the process of extracting key data from lease agreements and summarizing it in a standardized format. Lease abstraction is a critical aspect of lease management as it helps to ensure that important lease-related information is easily accessible–without having to peruse the entire lease to get access to the lease data in question. In this blog post, we will explore some best practices for lease abstraction.

Define the key fields

The first step in lease abstraction is to define the key lease data points that need to be abstracted. This usually includes all financial fields and some important non financial fields. 

Tip: It is a good idea to collaborate with an experienced lease abstraction and administration vendor who can help you define the key data points (Learn More) 

Standardize

The next step is to decide on a standard format for capturing the critical lease data. Standardization brings about consistency and consistency is very important in lease abstraction. Creating a lease abstraction template and using that to capture the critical data points from your leases can help you standardize your lease abstracts faster.

Tip: Deploying an Ai-based lease abstraction software can bring about a lot of consistency to your lease abstraction process. (Learn More) 

Review and verify data

Once the lease abstraction has been completed, it’s important to review and verify the data. This includes verifying lease terms, rent, and any other critical data that has been extracted. Reviewing and verifying data can help to identify any errors or discrepancies in the lease agreement, which can be corrected before they become a problem.

Ensure your lease abstracts are updated

Lease abstraction is not a one-time process. Lease terms and conditions can change over time, so it’s important to update the abstraction regularly to reflect these changes. Lease abstraction should be updated whenever a new lease is signed, when there are amendments or addendums to the lease, and when leases are renewed.

A well-executed lease abstraction process can help to improve operational efficiency and help you enjoy a better lease portfolio ROI.

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 17+ years, to leading retailers, REITs, property owners/managers, and corporate accounts seeking a strategic advantage. All client projects are performed in-house.

Whether it is one clause, one amendment or a whole lease agreement, we can do it for you.

Maximizing lease portfolio savings with CAM Reconciliation

 

Common area maintenance (CAM) charges are a crucial aspect of commercial property leasing. These fees cover the costs associated with maintaining and operating shared spaces, such as lobbies, elevators, parking lots, and common areas in multi-tenant buildings. Landlords typically charge CAM fees on top of base rent, and they can have a significant impact on a tenant’s overall occupancy costs.

However, CAM charges are not fixed and can vary from year to year, based on actual expenses incurred. This is where CAM reconciliation comes in – it is a process that ensures that tenants only pay their fair share of the CAM expenses, based on the actual costs incurred by the landlord. CAM reconciliation is an important tool for maximizing lease portfolio savings because it helps to eliminate overcharging and identify potential cost savings for both landlords and tenants.

Here are some of the ways CAM reconciliation can help maximize lease portfolio savings:

Identifying and correcting overcharges

CAM reconciliation involves comparing the estimated CAM charges that were billed to tenants at the beginning of the lease term with the actual expenses incurred by the landlord. If the actual expenses are less than the estimated charges, the tenant may have been overcharged. CAM reconciliation allows for adjustments to be made, and any overcharges to be refunded to the tenant. By identifying and correcting overcharges, tenants can save money on occupancy costs, which can have a significant impact on their bottom line.

Encouraging landlord accountability

CAM reconciliation encourages landlords to be more transparent about their expenses and to be accountable for their management of shared spaces. Landlords are required to provide tenants with detailed expense reports that show how their CAM fees were spent. This level of transparency can help to reduce the risk of being overcharged by Landlords and can give tenants greater confidence in their leasing arrangements.

Negotiating better lease terms

CAM reconciliation can also help tenants negotiate better lease terms. By reviewing the actual CAM expenses incurred, tenants can identify areas where expenses could be reduced, such as by implementing energy-efficient measures or by negotiating better vendor contracts. This information can then be used to negotiate more favorable lease terms, such as lower CAM fees or longer lease terms.

Improving cash flow

CAM reconciliation can also help improve cash flow for both landlords and tenants. For landlords, CAM reconciliation can help to ensure that expenses are accurately tracked and billed, which can help to reduce the risk of unpaid expenses or uncollected fees. For tenants, CAM reconciliation can help to eliminate unexpected charges and ensure that they only pay for their fair share of expenses, which can help to improve cash flow and reduce the risk of financial surprises.

In conclusion, CAM reconciliation is an important tool for maximizing lease portfolio savings. By identifying and correcting overcharges, encouraging landlord accountability, negotiating better lease terms, and improving cash flow, CAM reconciliation can help both landlords and tenants save money on occupancy costs. If you are a tenant, it is important to review your CAM charges get a CAM reconciliation done by an experienced CAM audit firm or a lease administration service provider.

Lease Abstract Fundamentals

 

When it comes to lease portfolio management, there are many moving parts. At the core of it all lie your lease abstracts, which capture the essence of your leases by summarizing the key financial and non-financial clauses therein. With quick and easy access to crucial lease information, lease abstracts help you stay on top of your lease portfolio at any time.

This week we share a whitepaper that discusses the perspective, processes and resources needed to manage your lease abstraction project successfully, while highlighting the areas that you should focus on when setting up your lease abstraction process.

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 17+ years, to leading retailers, REITs, property owners/managers, and corporate accounts seeking a strategic advantage. All client projects are performed in-house.

Whether it is one clause, one amendment or a whole lease agreement, we can do it for you.