RE BackOffice - Blog - Page 21 of 33 -

CAM audits, Lease abstraction, Lease Administration
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October 14, 2021
by ADMIN

Lease Administration post: Are you paying too much rent?

Rent is one of the key components of any lease. In fact, the rent roll is the core of any lease agreement. However, it can also be one of the most complicated elements. Sometimes, owing to its complexity, tenants may even end up paying more than what they owe. In this blog, we discuss what constitutes the key elements of the rent roll that tenants shouldn’t ignore.

Rent per square feet

If your rent is calculated per square foot, you need to ensure that the base of this calculation is correct–which is the leased space or sometimes referred to as square footage. Sometimes, even a minute error in lease square footage calculation can make a vast difference in the final amount that is levied on the tenant. This is especially true when the base rent, CAM charges, and other operating expenses are calculated on a per-square-foot basis. Learn more in this blog post

Any rent-rise indicators

If your rent hikes are pegged to any other economic indicators such as the Consumer Price Index (CPI), you need to ensure the data related to the indicator is accurate. Any changes resulting due to changes in the base price index need to be accounted for accurately and reflected in the rent roll.

What about CAM?

In net leases, CAM charges constitute a considerable chunk of your rent roll. Verifying CAM charges and ensuring the amounts levied are accurate is complex due to the nature of CAM elements. CAM includes multiple headers and complicated computations that often leave room for interpretation and also increase the chances of miscalculations. You need to be aware of the various components of your CAM charges and how they are computed for you as per your lease. For example,

What happens if you moved into a fairly empty building that’s only gradually filling up?
How is the CAM divided among the existing tenants including you, until the time there’s 100% occupancy?
What will be the repercussions on your CAM charges as new tenants are signed up.

As a tenant, it is very important to ensure that you have a solid understanding of your rent structure and the various elements that constitute your rent roll. It is also essential that you track them, consistently to ensure there are no errors, as errors that are embedded in the lease, year, or year can cost you dearly even impacting your key real-estate-related business decisions.

Two things that can help you in this regard are

Timely CAM audits by an experienced lease services provider who will scrutinize your invoices, CAM calculations, and other related charges levied by the landlord to identify any errors and have them rectified for you.
Accurate lease abstracts that simplify complex lease terms for you without diluting their essence so you understand your rent roll and related components clearly.

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 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. Please contact us today to learn more.

CAM audits, Lease abstraction, Lease Administration
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October 6, 2021
by ADMIN

CAM Reconciliation: Should you outsource it?

Outsourcing your CAM audit and reconciliation tasks to an expert lease administration company helps you in many ways.

It keeps your costs low: This is one of the major benefits of outsourcing your CAM audit and reconciliation. You save on HR and training costs that you would incur if you hired someone for lease accounting and lease administration in-house.
Expertise: When you outsource your CAM reconciliation to a lease administration company, you benefit from their expertise. A lease administration company has vast experience across multiple industry types which you can leverage. Your in-house lease administrator may not have that kind of exposure and expertise.
Easier negotiations: 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.

***Whether it is one clause, one amendment, or a whole lease agreement, we can do it for you.* *Please contact us today to learn more.***

Case Study: The Role of AI in a large-scale lease abstraction project

In our blog this week we discuss how RE BackOffice deployed its state-of-the-art Lease Abstraction Software, LeaseAI to successfully complete a large-scale lease abstraction project for its client

Who was our client?

Our client was an American fast-food corporation with a global footprint, having over 3,800 franchised or company-operated restaurants spanning across the United States and 43 foreign countries.

What were the client’s requirements?

Client required RE BackOffice to

Abstract critical financial and non-financial information from their leases
Conduct a lease document audit which involved downloading the lease documents from the client’s document management system, renaming them as per the standard nomenclature provided by the client and notifying them of any missing or unexecuted document.

The client used Lucernex software platform for their lease accounting and administration purposes, so Team RE BackOffice worked extensively on Lucernex during the course of this project.

Challenges

RE BackOffice had to review 20,000+ documents and classify them under specific categories as requested by the client
There were multiple versions of the same document that had to be spotted and eliminated accurately.
Keeping track of active leases, subleases, sub-subleases, easement agreements belonging to a particular store to ensure no lease was missed out.

The REBO approach

RE BackOffice deployed a team of 30 lease analysts and 20 quality analysts and 5 document reviewers to the project
REBO’s in-house lease abstraction software, LeaseAI was leveraged for the non-financial abstraction phase of the project, which helped REBO scale up its production and delivery to match the client’s timelines
RE BackOffice followed a hybrid approach, which meant that every lease abstracted by LeaseAI was further checked by an experienced lease quality analyst to ensure it was accurate and edits were made where required
On the document management front, Team RE BackOffice updated each lease document name to reflect its Execution Date to avoid confusion, as to whether the document in hand is the final/latest version or not
The documents used for abstraction were uploaded to the database for future reference
Weekly submissions were made to ensure the client has enough time to review the leases and suggest any modifications to the abstracts.

The entire project spanned over 15 weeks and was successfully completed within the timeline provided by the client.

***Whether it is one clause, one amendment, or a whole lease agreement, we can do it for you.* *Please contact us today to learn more.***

CAM audits, Lease abstraction, Lease Administration
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September 23, 2021
by ADMIN

Lease Administration post: Lease Audit Vs. CAM Audit: What’s the difference?

Both, lease audit and CAM audit are important functions in the process of lease portfolio management. Though used interchangeably sometimes, they actually refer to two different lease administration services. This blog discusses the difference between the two terms. Let’s begin by defining both of them.

Lease Audit

The term, Lease Audit refers to auditing of a lease abstract in the light of the original lease documents. Lease audits are usually performed when landlords or tenants already have the leases abstracted but wish to verify the accuracy of the lease abstracts. Some reasons for choosing to have a lease audit done could be because-

The lease abstracts are outdated. If the leases were amended or any addendums were made to them at a later date, you would want to ensure that the lease abstracts reflect the most recent information, which won’t be the case if the lease abstraction was done before the amendment/addendum was executed. In such scenarios, landlords or tenants have two choices–a) Get the Amendment/Addendum abstracted and added to their existing lease abstract or, b) Get the entire lease abstract audited and then updated to reflect the change due to the execution of the new amendment/addendum. Many opt for option b as it gives them the opportunity to confirm the accuracy of their existing lease abstracts.

Getting an experienced and trusted lease administration services provider to audit your leases can also help by bringing to light any instances where critical lease data may have been missed out. A lease administration services vendor with enough expertise and perspective into the lease abstraction process will also be able to identify any shortcomings in your original lease abstract template. They can help you make changes to your lease abstract template so it is more comprehensive and captures the lease information that matters to you, going forward.

CAM Audit

A CAM Audit, also known as the desktop audit is a lease administration process that involves reconciliation of account payables and receivables, mostly involving Common Area Maintenance (CAM) charges to ensure the tenant is not being undercharged or overcharged depending on who commissions the audit. Usually, CAM audits are commissioned by tenants. Here’s the reason why.

In the case of net leases, CAM charges are a core component of the rent roll. The thing about CAM charges is that it includes multiple headers and complicated calculations, which leave room for errors and even interpretation. Tenants need to be aware of the various components of their CAM charges and how they are computed as per their lease. For example, what happens if they move into a fairly empty building that’s only gradually filling up? How is the CAM divided among the existing tenants including them, until the time there’s 100% occupancy? What will be the repercussions on your CAM charges as new tenants are signed up.

When it comes to rent-roll calculations, the onus is always on the tenant to identify errors, if any, and report them to the landlord. So, tenants need to pay a lot of attention to the core rent roll components such as rent escalation calculations and CAM charges allocation. Overlooking any errors in these calculations will cause them to become a part of the base calculations for the next lease year which can prove very expensive for the tenant. Plus, most leases place a timeframe within which such discrepancies should be reported to the landlord. Failing to do so on time may be construed as acceptance by the tenant to make the payments. This is why most tenants commission regular CAM audits, usually, on an annual basis.

Whether you are a tenant or a landlord, when there is a vast lease portfolio that runs into hundreds of leases or more, CAM reconciliations figures can translate into significant cost savings.

***Whether it is one clause, one amendment, or a whole lease agreement, we can do it for you.* *Please contact us today to learn more.***

Lease abstraction, Lease Administration
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September 16, 2021
by ADMIN

Lease Abstraction Project Management and Communications

A key aspect to consider before you sign on a lease abstraction partner is their project management and communications protocol.

Lease abstraction

Familiarize yourself with your lease abstraction partner’s abstraction process. Learn more about the team that will be deployed by them to work on your project. Get more information on the team size, availability, point of contact, etc.,

Quality control

This is one of the most important parts of your lease abstraction project. Ask your lease abstraction partner about their quality check process. Find out how many tiers of quality check your lease abstraction partner will be performing as part of the SOP. Check if they offer a 100% accuracy guarantee and have errors and omissions insurance. After all, when it comes to lease abstracts, accuracy is really everything and inaccurate data can have far-reaching effects, including heavy financial losses and sometimes, even lawsuits.

Data security

Data security is a very real concern when outsourcing your lease administration and abstraction processes. Make sure you are comfortable with your lease abstraction partner’s data storage, handling, and disposal process.

Communications

Find out how many points of contact will be provided to you. You would need at least 2 so you can reach out to one, in the event the other is unavailable. Also, check their availability in terms of timing–a key factor to consider if your lease abstraction partner operates offshore.

Lease portfolio management is an ongoing process and not a set-it-and-forget-it kind of activity. So, if you are collaborating with a lease abstraction/administration vendor, it makes sense to sign on someone who can offer quality, ongoing lease administration and support you throughout the entire lease lifecycle consistently. And, we do that!

***Whether it is one clause, one amendment, or a whole lease agreement, we can do it for you.* *Please contact us today to learn more.***

Lease abstraction, Lease Administration
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September 7, 2021
by ADMIN

Lease Administration post: Is your lease data moving homes? Here’s how to ensure you do it right

Are you migrating your lease data from one lease management platform to another? Then make sure you don’t do so blindly. In fact, Data Migration from one application to another is a good opportunity to audit your lease data and lease abstract data, identify mistakes and gaps and fix them. When you are shifting to a new application anyway, why not ensure you are doing it right in every aspect? Importing inaccurate lease data from your old lease application to the new one doesn’t serve any purpose. Also, pay attention to the data structure. Even if your existing lease data is found to be accurate after an audit, you still need to ascertain the accuracy of data structure post-migration by ensuring all data fields are mapped correctly at the time of migration. If you truly want to leverage your new lease management system, you need to make sure you input the right data into it because the output will be largely based on what you feed into the system.

Changes in technology could require you to revisit your leases. For example, migration from spreadsheets to a robust lease administration platform, or even from an existing lease administration platform to another. Such events could be termed as catalyst events that trigger lease abstract updates. The goal is to ensure that you leverage such catalyst events to benefit your entire organization and to optimize your lease portfolio management process. And, we can help you do that!