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Our Responses to FAQs about Lease Expense Review Services
What trends are you seeing this year?
Why are the rates different between the suburban and downtown buildings?
What is the step-by-step process for a Lease Expense Review?
01. What trends are you seeing this year?
02. Why are the rates different between suburban and downtown buildings?
03. What is the step-by-step process for a Lease Expense Review?
04. When is the ideal time to do a Lease Expense Review?
05. What are the most common hesitations you hear from clients and how do you respond to them?
06. Will the tenant/landlord relationship be adversely affected by this review?
07. What is the cost of a Lease Expense Review?
By now, your Landlord should have provided your 2022 year-end Additional Rent reconciliation statement as well as their 2023 estimates – and odds are it is not what you expected.
The pandemic has created a misaligned set of expectations around operating costs.
Commercial real estate is gradually returning to normalcy after the disruption caused by the pandemic over the past three years. Despite the increasing economic challenges, such as inflation and rising interest rates, businesses are now working to improve their real estate footprint. Performing a lease expense review can not only help achieve cash recovery but also cost avoidance for you while eliminating potential risk from your lease terms.
Across Canada, many companies have implemented a hybrid work strategy, and as a result, many buildings continue to be underutilized. With fewer Tenants using their space, Landlords ought to be experiencing decreases in Operating Costs for items such as repairs and maintenance, utility consumption, and security. Tenants are expecting costs to decrease, yet many are finding the opposite to be the case.
Talk to your Cresa Advisor today to review your 2023 estimates.
Conducting a Lease Expense Review will help ensure you aren’t overpaying.
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Understanding your rights as a Tenant versus what the Landlord is able to charge back is paramount.
Exhibit 1
Increase in additional rent estimates across markets in the GTA
Changes to the language in leases
According to most leases, Landlords have the right to make adjustments in their calculation methodology which can increase or decrease operating costs, if they determine it is reasonable to do so. As a Tenant, it is crucial to look at the language in your lease to understand the rights required to challenge the Landlord’s determination of Additional Rent. In many leases, Tenants only have a limited amount of time to ask for support documents/information from the Landlord.
Understanding your rights, based on your specific lease, is important, particularly if you are being charged more than your appropriate share as per your lease. So, reading the fine print and being timely in terms of requesting and reviewing the Landlord’s support materials is more important now than ever.
Why do a Lease Expense Review?
A lease expense review provides an excellent opportunity to reduce operating costs, recover missed savings opportunities and protect your interests long-term. While mistakes made by landlords are not intentional, they are inevitable. Working with – and not in opposition to – your landlord, our advisors initiate an inquiry on basic lease compliance and fairness.
As your workspace continues to be underutilized, isn’t it time to get a second opinion on your commercial lease, to ensure every penny is accounted for?
Talk to your Cresa Advisor today to review your 2023 estimates.
Oversights happen.
We partner with occupiers exclusively to uncover their portfolio's hidden costs to optimize value. Lease Expense Review is an invaluable tool to identify billing errors that often occur in commercial real estate leases.
Download this Lease Expense Review Method one-pager to explore the value of conducting a Lease Expense Review, and when is a good time to do so.
How the Lease Expense Review process works
There are several levels of review which can be conducted individually or together. Often the size of the location and the potential for recovery determines the type of audit required.
A Desktop Review is applicable to all leases and involves an accounts payable review of the expense billing against traditional account processing standards. Cresa’s Lease Expense Analysts review back-up documentation for adequacy and conduct a quantitative verification of the calculation to ensure it’s consistent with the negotiated terms. This kind of review is typically performed on operating expenses but may also be advisable for a 12-month history if there is uncertainty over past payment practices.
A Desktop Analysis is a qualitative review that involves the investigation of suspicious charges. Our analysts provide an opinion of the correct recalculation and suggest next steps for correcting errors or negotiating reductions in billing. This type of review can be conducted without being on-site.
The financial benefit of a Lease Expense Review
Lease Expense Reviews are not only about recovering past refunds. A thorough Lease Expense Review can create future savings by ensuring the Landlord does not repeat prior practices that cannot be justified.
This means real savings that stay with you – where it belongs.
Whether this is your first time conducting a Lease Expense Review, or you have engaged in a Lease Expense Review previously, this is a crucial year to initiate the practice. For more information on the process, please reach out to your Cresa Advisor.
Our Experts
Maria Nenciu
Senior Lease Expense Analyst
Phone: 416.862.2666
Email: mnenciu@cresa.com
As an Affiliate member of the Association of Certified Forensic Investigators of Canada, Maria brings over 25 years of experience ensuring the tenant’s best interests are at the forefront of every audit she does while at the same time preserving the landlord and tenant relationship. Her forensic approach to lease audit has resulted in substantial savings for her clients.
Rameysh Karu
Lease Expense Analyst
Phone: 416.862.2666
Email: rkaru@cresa.com
As a Lease Auditor, Rameysh brings 10 years of progressive lease audit experience conducting on-site and desktop audits for retail, office, and industrial clients. Specifically, he collaborates with stakeholders to settle complex disputes to ensure the Tenant’s interests are advanced. Rameysh is able to see the big picture and thoroughly examine the minutiae of lease language, audit clauses and OPEX calculations.
Thought Leadership
