Lease Audit Candidates6-25-09 wBackgrnd copy

Which Office Tenants Should Consider a Lease Audit? By Paul Stevens of P. Stevens Associates, Inc. and William Gary of MacLaurin Williams, A Global Office of International Tenant Representative Alliance (“ITRA”) Should all Office Tenants audit their Landlords’ operating expenses annually? The answer is probably no. However, there are certain situations when auditing the Landlord’s lease operating expenses may be a very prudent business decision, especially in today’s turbulent economy. For most Office Tenants, rent is their second largest operating expense, exceeded only by personnel costs. An Office Tenant’s lease should provide audit rights to inspect the Landlord’s financial documentation for annual operating expense and real estate tax increases, often called “escalations”, that are related to a commercial lease. Auditing the Landlord’s operating expenses is the only way for a Tenant to assure that a Landlord is billing the Tenant fairly and properly. Base Year Audit – A Base Year audit is the single most important audit that any Office Tenant can have performed. This audit provides two (2) valuable benefits to an Office Tenant. First, it properly establishes the Base Year expenses, because all future annual expenses will be compared to the Base Year figures to determine an Office Tenant’s yearly liability of its share of the Landlord’s annual operating expenses. Second, it sets the stage by providing proof of how Base Year ...