Real estate occupancy costs represent one of the largest operating expenses for most companies. For organizations striving to improve their bottom line lease audits are a valuable tool in benchmarking and reducing their current and future real estate occupancy costs.
Mohr Partners, Inc. provides lease audit services to control real estate costs by conducting a systematic review of the properties in your real estate portfolio and then developing an appropriate strategy to minimize any associated financial risks. MPI does not regularly change the leases; MPI directly reduces their cost to your organization.
MPI would provide the assurance that landlords are complying with the intent of the leases. MPI performs a rigorous analysis of lease obligations that includes scrutiny of lease language, investigation as to underlying intent, and when appropriate, an on-site review of the landlord’s books and records. MPI presents the claims to the landlord and recovers overpayments.
A desktop/lease audit is a professional review of the operating expenses passed on to Tenants in commercial real estate by the Landlord. Operating expense statements are typically received annually during the first quarter of a new year and reflect increases in the operating expenses for which the Tenant is responsible for reimbursing to the Landlord. Calculations and expenses are evaluated for their compliance with lease terms, their adherence to accounting conventions, and their mathematical accuracy. In most instances, a lease audit will expose errors that result in improper charges by a Landlord to the Tenant and analyze their impact on the Tenant. These errors are usually in the Landlord’s favor and fall into three general categories:
INADVERTENT ERRORS Inclusion of expense items that should not be passed-through to the tenant under the terms of the lease.
CALCULATION ERRORS Mathematical errors and/or the use of factors that are not specified in the lease.
INTENTIONAL ERRORS Landlord’s conscious effort to pass-through tenant specific expenses or other expenses specifically excluded pursuant to the terms of a lease.
⊲ Reducing current and future expenses by recovering past overcharges and correcting erroneous billing practices
⊲ Clarifying landlord billing practices
⊲ Making Landlords aware that the Client is diligent about lease compliance
⊲ Identifying areas for improvement in existing processes
⊲ Verifying that all financial incentives, inducements, and allowances negotiated in the lease agreement have been provided by the landlord
⊲ Highlighting unfavorable lease provisions for future re-negotiation with the landlord
Clients pay 35% of the savings achieved. If no financial advantage is identified, there is a service fee of $750.
The Client had a 296,248 SF headquarters location in a large metropolitan area. MPI was retained to advise the Client in their Operating Expense Reconciliation Review, audit the Client’s lease portfolio, and negotiate with the landlord regarding any incongruent issues.
Clients pay MPI 35% of the savings achieved.
⊲ MPI reviewed all lease and landlord calculations
⊲ MPI requested and received expense back-up
⊲ MPI reviewed the books on-site with the property manager
⊲ MPI contacted and negotiated with the landlord
⊲ The landlord billed administrative fees which are not allowed per the lease agreement
⊲ Landlord billed management fees based on total income rather than net income per the lease agreement
⊲ MPI realized total savings of $126,552 for the Client