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7 Mistakes that can shake your Lease Administration Function

Landlords and tenants engage in lease administration activities to manage their CRE portfolios. The goal is to reduce the risk of missing critical dates and payments. But are lease administration functions effective and efficient? The answer is no. Many companies are struggling with increasing lease admin operations costs and the problem of missing data.

In this blog, we will look at the 7 common reasons the lease administration department may not be functioning as it should.

  1. Lease abstraction error
    Lease abstraction is the process of extracting critical data which involves obligations. If any information is overlooked or lost during this process, there could be monetary losses running into thousands of dollars.
  2. Lack of compliance with lease accounting standards
    The new accounting standards mandate the abstraction of additional data points, which may mean that leases need to be abstracted again. This is a burden on a company’s financial resources. Additionally, non-compliance will attract penalties.
  3. Lack of process and evaluation
    Developing and implementing a productive 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.
  4. No system or too many systems
    Investing in multiple software capable of catering to lease data management, document management, financial analysis, and accounting is important for any company to improve its efficiency. However, constant evaluation of this software is vital to ensure they are not redundant and are up to date.
  5. Wrong people on the staff
    Expertise in lease abstraction and lease administration tasks is mandatory for the smooth functioning of the lease administration department. Staff performance should be reviewed regularly to ensure they understand and conduct their duties effectively.
  6. Lease translation
    Global portfolios necessitate the translation of leases, and many companies do not have skilled resources to undertake this translation function. Service providers, who understand real estate, can accomplish this task economically.
  7. Lack of coordination between departments
    A lease administrator’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.

5 best practices for a high-performing lease administration function

Lease administration is a critical function of CRE companies and the work involved is resource-intensive – both in time and the unique skills required.  With the implementation of the new accounting standards and with the potential for significant financial losses due to missed dates or improper invoicing and payments, it is of strategic importance to define and implement a lease administration process that is robust and highly effective.

Running a lease administration function successfully is no easy task. In this blog, we will look at 5 best practices that are fundamental to a high-performing lease administration function.

Lease administration software
An effective lease administration process involves real-time access to lease information that will help make informed decisions. Having the right lease administration software in place can be a game-changer.  At a bare minimum, the software will allow key data to be stored in a central repository and provide critical date monitoring and valuable reporting capabilities.  The right lease administration platform will save time and money, and facilitate process flow optimization.  There may be short-term pain to implement new software, however, it will generate long-term gains that will make it well worth the efforts.

There are several excellent lease administration software platforms available and the best ones are partnering with clients to ensure the success of implementations.  If a software platform is already in use, continuous assessment of the software is required to ensure it is catering to the increasing needs of the company. 

Lease administration process
Understanding the entire lease life cycle, prioritizing business-critical elements of leases, and determining the optimal process to execute all the tasks involved is critical for the lease administration team. To accomplish this, a cross-functional team (legal, operations, accounting, finance and lease administration) should be set up so that all the stakeholders can work with the lease administration team to view the lease portfolio in its entirety, understand and prioritize business needs, and finalize the lease administration game plan.  The goals of the process should be to improve visibility and efficiency, support business decisions, reduce costs, reduce risks, and ensure compliance with the accounting standards. 

Companies who have outsourced their lease administration function should have identified the project and process deliverables with their service providers before the commencement of the project.  If this hasn’t been done thoroughly, it should be a high priority task to complete in the near term.

Lease abstraction process
Lease abstraction is the process of abstracting critical data points from the lease agreement and as such, this process is foundational to the success of any lease administration team.  An accurate abstraction means the business decisions dependent on the lease abstract are on solid footing.  The opposite holds true as well.  Bad abstract, bad underlying support for key decisions.

As important as the lease abstraction process is, it is also time-consuming and tedious.  High performing lease administration teams help key stakeholders understand and value the time commitment to completing the lease abstraction process accurately and thoroughly.  The process should include evaluating the lease agreement, abstracting the lease data into a concise format, checking the abstracted data for errors, and storing the data in a centralized repository that can be accessed at any time.  

The lease abstraction process lends itself well to outside help, especially when there is a big push to abstract all leases in a limited timeframe (i.e. software change, accounting standard compliance project, etc.).  Leading service providers who specialize in lease abstraction and administration can execute data abstraction projects, including multi-language lease translation, with ease; allowing limited internal resources to focus on the many deliverables that rely on the abstracts.  

Documenting & evaluating the lease administration and lease abstraction processes
While less glamorous than some of the other best practices, documentation and on-going evaluation of processes are important to the long-term success of lease administration.  As things change and the business grows, maintaining and documenting critical processes ensures the integrity and repeatability of key activities, of which lease administration has many.  

The scope and responsibility of the lease administration function has grown significantly in the past few years and as a result, there is a need for maintaining clarity in communications with key stakeholders, including the documentation and ownership of the underlying processes.  Utilize the cross-functional team to challenge the current processes and examine how they can be further refined and optimized.  Assign process owners to monitor and continually evaluate the processes and workflows, as well as documenting them.  Through documentation, each workflow can more easily be distinguished and evaluated for redundancy, gaps, and further refinement, which is vital to the long-term success of the lease administration function. 

Skilled Human Resource
Having a person with the right skills and right attitude for the job is a best practice for any function.  Lease administration isn’t any different.  In fact, the unique blend of skills for lease administration just means it’s more important and more difficult to accomplish.  Lease abstraction, document management, CAM reconciliation, accounting compliance requirements, operating expenses review, and occupancy cost analysis are some of the top technical skills required in a lease administrator. Soft skills include attention to detail, adaptability, and an ability to move quickly and intelligently from the weeds to the executive level view of the lease portfolio.   High performing lease administrators are irreplaceable and a high return on investment to the organizations they serve.  Whether hiring directly or sourcing exceptional talent through a leading service provider, having the right mix of skills and attitude in the lease administration function is of critical importance to the success of the organization.

As you evaluate your resource needs, it is important to anticipate and prepare for any eventualities like an increase in the number of leases in the portfolio, employee attrition, changes to the accounting standards, and training requirements that will affect the smooth functioning of the lease administration department.

At RE BackOffice, Inc. we know the importance of lease abstraction and administration.  Since 2006, our clients have relied on us as key partners; helping them to achieve success.  At RE BackOffice, your back office…is our front office.

RE BackOffice introduces Month-To-Month Lease Administration Services

RE BackOffice has announced that it is reinventing its Lease Administration service model by adding month-to-month Lease Administration services to its offering. These services provide a solution to help tide companies over and maintain their lease portfolios effectively even during the challenging Covid-19 situation. This helps companies bridge the gap efficiently, without them having to worry about any long-term commitment from their end as there is no ongoing contract involved.

Companies opting for the month-to-month lease administration service get access to not just one person, but to RE BackOffice’s whole team of highly skilled lease administrators, at reasonable prices. This allows them to scale up or down as per their needs. Businesses can clear all their lease administration backlogs and be ready to hit the ground running when the situation eases, thus gaining a clear competitive edge.

Speaking of the offering, Holly Khera, CEO, RE BackOffice, said, “The Coronavirus crisis has created a difficult situation for businesses worldwide. It presents even tougher challenges to companies that were in the midst of hiring new staff to meet their lease administration requirements. This is where RE BackOffice’s month-to-month lease administration services can help. There’s no pressure to sign a long-term contract with us. Clients can avail this service for as much or as little time as they need. Plus, they save on costs associated with hiring new staff. These benefits can go a long way in the current situation when finances are already stretched.”

Backed by 14+ years of lease experience, RE BackOffice’s lease administration team is well versed in all leading lease administration platforms including MRI, Yardi, Prolease, Lucernex and more. To learn more about RE BackOffice’s month-to-month lease administration services, contact us at support@rebackoffice.com.

10 Reasons Why Companies Should Consider Outsourcing Lease Administration Activities

Supporting the administrative costs of a company’s real estate can be a significant drain on resources. Organizing, managing and monitoring leases is a significant challenge, especially where there is limited in-house support. Any delay in payments or missed timeline can cost companies thousands of dollars. This makes on-time and accurate lease administration an important aspect of any company today. But is lease administration the core competency of most companies? Probably not. Even with an in-house lease administration team, the staff will not be able to meet demand as the portfolio grows. Also, adding more resources to handle the surge in tasks caused by new portfolios can put a big strain on the business. 

Here’s why outsourcing can be a more efficient way to handle real estate portfolios. 

  1. By managing the day-to-day lease administration activities, service providers can provide timely access to accurate lease data.
  2. Consistent execution of tasks will ensure all lease obligations are met on time.
  3. Service providers implement best practices that are aligned with the company’s goals. Companies can expect to see a more streamlined lease administration process.
  4. Service providers have a team of highly experienced staff having in-depth knowledge and experience in leading lease administration platforms.
  5. Lease translation has been an on-going challenge for companies with global portfolios. Service providers with real estate knowledge can provide full or partial lease translation services at economical costs.
  6. Service providers are SMEs with years of experience in handling the lease administration function. Companies can consult the service providers’ to utilize their expertise regarding the new accounting standards, software to be used and for planning, evaluation, and documentation of the lease administration processes.
  7. Companies have an option to scale the resources up or down as per their business needs. This will ensure continuity of lease administration activities without the additional financial burden.
  8. Companies can quit worrying about compliance with accounting standards as service providers will ensure all the lease data are up to date. 
  9. Service providers train their staff continuously on new processes, the latest software, and new accounting standards.
  10. Service provider services is a virtual office that is accessible 24*7. In case of any eventualities, service providers can be banked upon to provide unhindered services.

Outsourcing works just like a company’s in-house lease administration experts except that they can handle a large number of portfolios more efficiently and will cost a fraction of the amount involved in hiring and training resources.

So, if you’re a company with geographically dispersed real estate portfolios, have come across inconsistencies in CAM reconciliation on more than one occasion, have overcharged/ undercharged tenants, or simply are shying away from maintaining accurate and consistent lease data due to resource and cost constraints, then outsourcing is for you.