Negotiating Audit Rights in Leases

Negotiating Audit Rights in Leases After years of refunding rent overcharges to tenants, landlords across the country are striking back: they are creating obstacles to stop tenants from auditing and challenging their lease charges. What are Lease Audit Rights and Why Does a Tenant Need Them? In most leases, the tenant is obligated to pay for a share of building operating expenses, taxes, utilities and other costs. The provisions that impose these obligations are often complex, requiring a high level of diligence on both the landlord to bill correctly and the tenant to monitor the charges. Errors are commonplace. Statistics show that close to 90% of leases have mistakes, mostly because landlords’ administrative personnel don’t tailor the bills to each individually negotiated lease. Often, the only way for a tenant to know if the bills are correct is to dig into the landlord’s accounting records related to the property. But do tenants have the right to do this? Audit Rights Specifically Granted by the Lease. Many leases grant tenants the right to review the books and records of the landlord to ensure that the charges billed are correct. Similar rights exist in partnership agreements and many other types of financial contracts. Audit rights can be found within the clauses outlining the tenant’s obligations to pay these charges. These clauses often state that the tenant has, upon reasonable notice, the right to visit the landlord’s ...