In our previous blog, we spoke about CAM & tax billing errors and why the possibilities of such errors make it imperative to have a well-defined Right to Audit in the lease. But the tenant’s auditing rights can be ambiguous and limited. To address these issues, a clear understanding of the various levels of audit rights and limitations is required. In this blog, we explore the different levels of audit rights every tenant should be aware of.(more…)
Common Area Maintenance or CAM expenses in a lease specifies the tenant’s proportionate share of the operating expenses which is incurred by the landlord for the operation of the premises. Tenants depend on their landlords for various services but often they lose focus on their lease obligations and end up overpaying their landlords. And this oversight is replicated year after year, unmonitored. Hence, it is important to verify whether the charges levied by the landlord for these services are based on fair market prices. This is where a CAM & Tax audit will be beneficial for the tenants. A CAM & tax audit is the process of analyzing and verifying the charges being paid to the landlord in order to make sure there are no deviations from the terms agreed between the landlord and the tenant. By verifying the expenses passed on to the tenant, a CAM & tax audit can help tenants save thousands of dollars that would otherwise be lost due to mismanagement and misinterpretation of the lease language.(more…)
Lease abstraction is the process of summarizing key, high-level information of a lease. A lease abstract gives you exactly what you need for due diligence, in a concise format. But abstraction of leases is more like an art. It requires skill and patience. The main challenge arises when a landlord or tenant has a huge portfolio of leases and they don’t have a solid process to abstract leases effectively. Moreover, FASB ASC 842 requires abstraction of as many as 55 data points from leases to meet their compliance requirements. And without an abstract, it will be tedious and time-consuming to analyze all the key clauses for each lease. (more…)
With the new accounting standards, equipment leases with a duration of more than 12 months must be recognized on the balance sheet. This change in financial reporting has had a huge impact on companies who are not prepared to handle the mammoth task of sifting through the equipment leases and making the necessary transition.(more…)
The new accounting standard has brought with it the need to adopt new technologies as well as modify existing ones. It also raises concerns about the abstraction of additional lease clauses and the need to change business processes. As a result, companies, both private and public, are facing numerous challenges surrounding the new accounting standards. Here are some tips that will facilitate the implementation process.
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Renting a commercial space is an important milestone in your business. However, not many are aware that leases are open to negotiations that can be in the tenant’s favor. Since the rent and operating expenses affect the bottom line, tenants need to be cautious before committing to a lease agreement. Here are some tips to help negotiate a commercial lease.
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