Would you sit idly by if you knew that your commercial property was making less money for you than it could? Well, most commercial property managers and landlords are in this very position.
If you want to find out if that's you, then you should go through a lease audit and cost recovery process. This is a comprehensive analysis process that will help you plug compliance gaps as well as potentially find extra recoverable costs and spending inefficiencies.
Learn more about how this process can benefit you in this brief guide.
How a Lease Audit and Cost Recovery Process Works
A commercial property audit is an incredibly in-depth review of the lease contract or contracts a commercial landlord has with their tenant(s). A landlord or property manager could use lease auditing software to do it if the contracts aren't too complicated. However, larger properties, more complicated contracts or multiple tenants are all scenarios that would warrant hiring a professional auditor.
In the auditing process, you or the auditor(s) will review the terms of the lease agreement as well as all the property's paperwork. A non-exhaustive list includes:
- Accounting records and information
- Compliance certificates and reports
- Correspondence between yourself, tenants, and some third-party contractors
- Inspection records
This information will help highlight how well tenants adhere to lease terms and may show where costs can be recovered.
Benefit 1: Identifying Recoverable Costs
Implementing and improving cost recovery strategies should be one of your primary financial management goals. Broadly defined, it is the act of recouping the costs you incurred when rendering your service (leasing your property).
An example in a commercial lease would be where you bear one of the utility costs instead of your tenant. There are often several recoverable costs hiding in the cracks, and a lease audit can help you find them.
Benefit 2: Improved Negotiation Position
A proper lease audit may set you up well for a lease agreement review. The audit can highlight valuable information that you can use when it comes time to renegotiate the terms of your commercial lease.
The results may show where a landlord is sleeping on extra revenue streams. These could include additional signage rights, extra parking fees, or any other untapped source of income.
Benefit 3: Decreased Liability
Standards of best practice and compliance codes are becoming exceedingly complex, but skimping on them can cause a lot of trouble for tenants or their landlords. A commercial lease audit will show if you have a compliance problem somewhere in your business relationship. Plugging these gaps can save a lot in legal fees and other hassles.
Master Your Commercial Lease Today
A commercial lease audit and cost recovery analysis can have numerous benefits for your operation. By sifting through the lease agreement and supporting documents, you can uncover a wealth of useful information.
Firstly, you'll be able to see where and how to recover costs. This information can help you take steps to improve profitability and assist you in negotiations. Secondly, it can also help you find and fix compliance problems.
If you're looking for commercial property assistance backed by two decades of experience, why not partner with PMI Cedarbolt? Contact us today to access expertise backed by two decades of experience with property management in Denver.
