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Is your lease abstraction set-up accurate?

 

You know how important it is to keep your lease portfolio up-to-date. You probably even have resources in-house to help you stay on top of your lease portfolio. But, what about accuracy? Are you capturing the right data fields? Any investment in your lease administration process won’t pay off if your base data is incorrect. So, how do you go about ensuring your core lease administration process is on-track? Here are a few things to consider –

Your lease abstraction template

You know lease abstracts play an important role in helping you understand the key elements of your leases. Plus, they come in handy when you need quick access to the critical lease elements at the time of strategic decision making. However, you need to ensure that your abstraction template captures all the relevant information. While some core fields such as rent, options, key dates, etc., are needed irrespective of what industry you belong to, there may be fields that are important for your business or industry in particular. Apart from such fields, there may be certain, less common clauses in some leases that must be captured. So, the first step to ensuring you are capturing the right data is a) Being able to identify what data matters to you and b) Having a template that caters to your needs by capturing that information.

How is the data captured?

Once you have the right template in place, the next step is to set guidelines for data capture. You want the data abstracted to be complete, yet concise. Your lease abstract should read like an abstract, highlighting the key elements of a particular clause. It shouldn’t be a copy-and-paste exercise, including all of your lease terms into your template. This approach defeats the purpose of lease abstraction.

What role will technology play in your lease abstraction and administration process?

At the outset, you need to be clear on the role technology will play in your lease portfolio management process. There are automated lease abstraction software tools in the market, that extract key information from leases and populate them onto a predefined template. While automating the lease abstraction process can offer considerable benefits in terms of lower turnaround time and resource costs, it cannot completely replace the human element. Lease abstraction and administration requires analysis of leases and related documents to arrive at accurate and most-useful data sets to help you drive critical business decisions concerning your real estate portfolio.

An experienced lease administration vendor who specializes in the initial process setup can help you ensure your lease administration and abstraction processes are set up properly. They can add value to your lease portfolio management process by

  • Conducting a review of your existing data capture mechanisms and templates for accuracy and usefulness.
  • Evaluating your current process and cadence and offering guidance on how you can make it more efficient
  • Suggesting changes to your existing lease abstraction templates to help you optimize your existing templates

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.

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

How can lease administration software platforms make your lease portfolio management process more efficient?

 

Staying on top of your lease portfolio can be challenging, especially when your lease portfolio consists of hundreds or even thousands of leases spread across the country or the globe. Lease abstracts help by ensuring that all the key financial and non-financial information contained in your leases are available for your use in a clear and concise manner. But, there’s another key component that helps keep your  lease portfolio updated–lease administration software platform. What do you do with all the information provided by the lease abstracts, where do you store the lease data, how do you leverage the data and how do you ensure they are accessible whenever you need them? A lease administration software platform provides answers to all these questions.

Here are a few ways in which a lease administration platform makes the lease portfolio management process simpler, more efficient and effective. 

A single platform for all your lease data

Lease administration platforms act as a single repository for all your key lease data. You can store digital copies of your leases, their related documents and the lease abstracts in the lease administration platform. This ensures that all critical information related to your leases is easily accessible and available in one place. And, it is not just for your real estate leases; you can use a single lease administration software platform for storing all your leases and leases abstracts, including equipment leases.

Critical date alerts

Lease administration software platforms have the ability to read the information in your lease abstract template and use it 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.

Standardized lease data repository

Having a single lease administration platform for all your lease abstracts brings consistency to your lease data, as information is stored in a template that’s standard for all leases.

Manage lease expenses better

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.

Understand your leases better

Modern lease administration software platforms are equipped with various tools, calculators and interactive dashboards that help you understand your leases better. They offer you a 360-degree view of the entire lease portfolio as well as each individual lease. You can analyze the ROI on your leases based on the outgoings connected to them. You can also plan and budget more accurately because you get a clearer prediction  of your upcoming lease expenses. 

Compliance

Meeting the compliance requirements related to leases can be challenging, especially if your lease portfolio is large. Lease administration software platforms are now also equipped with the required mechanisms to help you meet the FASB/GASB and ASC 48 compliance requirements.

So, 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. 

RE BackOffice has hands-on experience on all leading lease administration platforms including – 

MRI lease administration softwareYardi Lease administration softwarePro Lease Lease administration softwareVisual Lease lease administration softwareLease Accelerator lease administration softwareLucernex lease administration softwareLease Harbor lease administration softwareTango Lease administration software Co star lease administration softwareAccurent lease administration softwareAMT direct lease administration softwareTrimble lease administration softwareOracle lease administration softwareLease query lease administration software   IBM Tririga lease administration software

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.

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

The Role of AI in Lease Abstraction and Administration

 

Artificial intelligence (AI) and machine learning are fast becoming an integral part of lease abstraction and administration processes. Lease abstraction software and modern lease administration platforms deploy innovative AI and machine learning technologies to make lease portfolio management more efficient.  This blog discusses the role AI can play in lease abstraction and administration and its pros and cons.

Using AI to abstract leases can make the lease abstraction process faster

There’s no doubt that AI can speed up the lease abstraction and administration process. Leases are large and run into hundreds of pages. Plus, each lease portfolio may have thousands of leases. AI can sift through the pages and extract relevant data in no time, compared to manual lease abstraction. While some human effort is indispensable when it comes to lease abstraction and administration, AI can speed up the process and make it more efficient. Lease AI tools that use Optical Character Recognition can make your lease information ‘searchable’, so your lease administrators don’t have to read through the entire document to find specific clauses. They can enter the clause they are looking for in the search box and the system will automatically highlight those sections of the lease where the requested clause appears. For organizations that don’t have sufficient  resources to invest in lease abstraction and administration in-house, AI-based lease abstraction and administration software platforms may be a viable option. However, if you are not comfortable with AI-based, automated lease abstraction, outsourcing your lease abstracts to a trusted lease abstraction and administration vendor is a great choice. They would have the team strength, expertise and experience to get your entire lease portfolio abstracted in a timely manner.

Using AI to abstract leases can bring standardization to the process

When you have a team of lease abstractors, ensuring that all your lease abstracts are standardized may be challenging, as there are chances of slight variations in the lease abstract’s language and wording, even if the content in the lease abstracts is accurate. Automation and AI can provide consistency. But, that’s not the only advantage. An experienced lease abstraction services vendor can help you resolve challenges such as lack of language consistency in your lease abstracts by a) creating a well-defined lease abstraction template for you and b) deploying a well-trained, team of professional lease abstractors and lease administrators who are trained to follow specific lease abstraction standards.

Using AI to abstract leases may be slightly cheaper

Deploying AI for lease abstraction can also be cost-effective in comparison to having a large in-house lease abstraction and administration team. You could deploy automated lease abstraction and employ just a handful of experienced lease administrators to refine the output. However, there are other costs to consider such as the software license fee, labor costs associated with training your in-house lease abstraction and administration team on the software and of course, there’s always some risk involved when investing in any new technology. What if you discover that the lease abstraction software isn’t a right fit for you? While in the case of SaaS (Software as a Service) model, you may be able to simply discontinue using the lease abstraction software once your contract ends. That said, you would’ve already invested time, effort and money in migrating all your leases to the new tool. 

While deploying AI in your next lease abstraction project may not be a bad decision, you cannot rely on AI alone for your lease abstraction, administration or lease portfolio management needs. Every single AI-based output such as a lease abstract or a CAM reconciliation calculation should ideally be cross-verified and checked by an experienced lease abstraction and administration professional. This is important because no two leases are the same, and there are often instances where information is in different formats such as a handwritten note or an email. Plus, in cases where human diligence is required, AI may fall short as it is no match for years of professional experience or expertise.

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.

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

Lease Administration post: Budgeting for Common Area Maintenance (CAM) Expenses

Common area maintenance (CAM) charges are the tenant’s share of expenses that they owe the landlord. CAM charges are paid by tenants to reimburse the landlord for expenses incurred by them for 

  • Maintaining common spaces such as elevators, lobbies, stairwells, parking, etc.
  • Services that benefit all tenants such as snow removal, trash removal, security, etc. 

CAM charges are divided among all tenants based on their pro-rata share, which is calculated based on the area leased by the tenant. A tenant with a larger leased area will pay a greater percentage share of CAM expenses than one with a smaller area. 

Budgeting in CAM

In order to help tenants and landlords plan better and ensure no single party has to bear the load of  sudden, unforeseen large expense in the form of CAM charges, landlords resort to budgeting. Budgeting for CAM involves estimating the CAM expenses for the year for the entire property, computing each tenant’s share of expenses based on the estimate and sharing that with them so they can prepare for the expenses and also make payments to the landlord as stipulated in the lease. The CAM expense budget is usually prepared based on the previous year’s actual expenses incurred. At the end of the year, the estimates are verified against the actual expenses incurred by the Landlord and invoices are raised to the tenant for any additional charges that need to be paid. Similarly, in the event of any overpayment, the same is credited back to the tenant. 

This is where CAM reconciliation enters the picture. Tenants don’t have to simply take the landlord’s word for it. They have every right to verify if the landlord’s computation of CAM expenses is accurate. In fact, they should, because the onus of proving otherwise is on the tenant. Retail tenants with a significant number of leases can save a significant amount of money through CAM reconciliation alone. The challenge? CAM Reconciliation has to be done within the stipulated time frame in  the lease, which usually varies between a month to three months. However, this is not something tenants can let slide because it has far-reaching implications. For example, in the case of leases where CAM expense hikes or rent increases are calculated based on the previous year’s share, any error in CAM computation can embed itself in the lease affecting pushing the overall lease cost high, impacting the lease ROI negatively in the long run. 

CAM overpayments are not uncommon–especially in the case of retail tenants because their lease portfolio is usually quite large. Keeping track of their lease expenses across hundreds or even thousands of leases spanning across multiple locations is tricky. Even if you invest in a good lease portfolio management system or lease administration software, there’s a considerable amount of human effort involved, which makes it challenging to identify overcharges and bring them to the landlord’s notice for rectification. Because CAM reconciliation is an annual exercise, it makes sense to outsource it to a trusted lease administration service provider who can handle the entire process, right from scrutinizing the invoices raised by the landlord, recomputing the tenant’s pro-rata share of the expenses to co-ordinating with the landlord’s lease administration team in the event of any discrepancies or need for further clarification.

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.

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

Lease Administration post: Understanding different types of CAM Computations

CAM or Common Area Maintenance charges are a critical component of Triple Net leases. Our blog this week discusses the various types of CAM calculations that may find their way into your lease. But, before you proceed, if you’d like a quick refresher on what CAM constitutes, please check out our last blog post, CAM (Common Area Maintenance): An Overview. 

Fixed CAM

Fixed CAM refers to a fixed amount of CAM charges that would be levied on the tenant. When CAM is computed on a fixed basis, there are some advantages to both parties, i.e, the landlord and the tenant. For the tenant, there’s a sense of certainty and security because the tenant doesn’t have to pay more even if their pro-rata share becomes higher owing to a lower occupancy rate of the leased premises. Why? in the case of Fixed CAM, regardless of the occupancy rate and the tenant’s pro-rata share they will continue to pay the CAM amount agreed upon in the lease. Also, since the different expenses under the CAM header are not calculated and consolidated to arrive at the CAM share of the tenant, there’s no scope for CAM audits or year-end reconciliations and adjustments. From the landlord’s perspective, irrespective of the actual expense incurred, they will get the fixed CAM amount, which will work in their favor if the actual expense incurred is less than the fixed amount. This arrangement works best when the tenant and landlord have a long-standing, trusted relationship. The fixed CAM amount is generally what is considered fair and reasonable by both parties. Also, sometimes, the parties may agree to include a clause to safeguard themselves and include certain expenses under the CAM header in the Fixed CAM category and charge/pay some others on a pro-rata basis based on the actual expense incurred. 

Limiting CAM Charges when not opting for Fixed CAM

Fixed CAM is not very common and tenants usually opt to pay for CAM expenses as a percentage based on their pro-rata share. However, in such cases, there’s always an underlying fear of the lease ROI being affected negatively for the tenant due to unforeseen increases in CAM charges. This challenge is resolved by putting a cap on CAM charges. There are different ways in which CAM charges can be capped to safeguard tenants’ interests.  Any CAM charge hikes are limited to a pre-decided percentage of the base year’s CAM expenses or the previous year’s CAM expenses. The percentage rise may be calculated on a cumulative or compounded basis, depending on the lease agreement.

If, as a tenant, you are not opting for Fixed CAM, please be sure to conduct regular CAM audits and reconciliation to ensure you are not paying more than what you owe in terms of CAM chargers. You also need to understand the various clauses in the lease that will affect your share of CAM charges.  CAM audits and reconciliations by a reputed lease administration services provider can help you save a significant amount of money annually, especially if you are a tenant with leased premises across multiple locations.

 

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.

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

Lease Administration post: CAM (Common Area Maintenance) Overview

 

CAM or common area maintenance charges are an important element of the rent roll. 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. Sounds simple, doesn’t it? However, CAM is one of the most complex elements of the rent roll and it is extremely important from a tenant’s perspective to get it right. This is because there are various factors influencing the CAM charges right from how it is calculated to what elements are included therein. It is not uncommon for Landlords to overcharge their tenants when it comes to CAM expenses because of oversight or confusion regarding how the CAM expenses are to be calculated. 

How are CAM charges calculated?

CAM charges are usually calculated on a pro-rata basis, meaning, the total CAM expenditure is divided amongst the tenants in the building based on the ratio of their leased space. For example, a tenant who has leased 2000 square feet in a building will pay a higher CAM amount than one who has leased 1000 square feet of space in the same building. Another factor that can affect the CAM charges’ calculation is the occupancy rate. Since the entire CAM expense is shared on a pro-rata basis among tenants, a higher occupancy rate translates to lesser CAM charges per tenant, as there are more tenants sharing the load. 

What elements constitute CAM charges?

Usually, CAM charges include the costs associated with maintaining the common areas and facilities of the leased premises. This includes lobby areas, stairwells, elevators, parking lots (in some cases), etc., Generally, CAM charges don’t include any capital expenditure incurred with respect to the common areas, though they may be amortized by the landlord over a period of time.

Are CAM charges the same as operating expenses?

Though sometimes used interchangeably, CAM charges are not the same as operating expenses. The term, operating expense is much more vast and covers additional expense items apart from those included in under the CAM charges head. Examples include Taxes and insurance. 

Are you being overcharged? Your lease has all the answers!

At the end of the day, the answers to all the questions regarding CAM lies in your lease. Your lease specifies everything you need to know about your CAM expense calculations such as, 

  • What constitutes CAM in your case?
  • How are the CAM charges calculated?
  • Are there any specific exclusions to the CAM charges head?

To stay on top of your leases from the CAM charges perspective, you need to do two things. The first is obviously getting your leases abstracted. A lease abstract will provide you quick access to the CAM charges data that you need and, the second step is to get a CAM audit done annually.  CAM audits and reconciliations by a reputed lease administration services provider can help you save hundreds of thousands of dollars annually, especially if you are a tenant with leased premises across multiple locations. Plus, If there are any discrepancies in your CAM calculations, the lease administration company to which you have outsourced the CAM reconciliation work will be the one getting in touch with your landlord. In general, this scenario is better accepted by Landlords, as the lease administration company comes across as a more reliable, third-party than your own internal team when reaching out to your Landlord. Plus, lease administration companies specialize in this kind of communication and usually have a process or protocol which is generally well-received by the other party. 

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.

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