FAQs
What is a lease audit?
A lease audit is a comprehensive process involving the review of a tenant lease and billings to verify that the tenant was charged for their proper share of costs, as prescribed by the lease. The lease audit typically consists of BDO Corporate Real Estate Services obtaining a thorough understanding of the lease and performing a detailed review of the landlord's books and records. From the initial review to the resolution of the audit, the BDO Corporate Real Estate Services professionals guide you through the proper steps to achieving your lease audit objectives.
Why do you need a lease audit?
With the exception of payroll, most organizations spend significantly more on their real estate costs than any other expenditure. As such, the need to review and assess the accuracy of these charges is essential to corporate executives as both a cost-cutting mechanism and a management tool to assess the company's current financial climate. Operating expense pass-through items, including annual operating expense escalations, porters' wage fees, utility charges, real estate taxes, etc., are often prepared using arcane techniques that can be difficult for non-real estate professionals to accurately interpret. Our experience shows that savings are found in most real estate operating expense escalation statements and utility bills. For many of our clients, the savings are significant. But even small adjustments can make a big difference in bottom-line performance for most companies.
How do I know if I have the right to audit my lease?
Most leases specify the tenant's right to audit as well as the terms under which the audit must occur. The lease will typically specify an amount of time that the tenant has to conduct an audit and/or dispute the charges. The requirements can be very restrictive, and in some cases quite onerous. It is critical that a tenant fully understand their rights and take the appropriate actions.
What are the overall objectives of a lease audit?
Our goal is that, at the conclusion of the engagement, the following objectives will have been achieved:
- To recover refunds or rent credits as a result of improper charges.
- To offer comfort and assurance in the knowledge that occupancy expenses have been billed accurately, and in accordance with the provisions of the lease agreement.
- To supply information on particularly onerous or restrictive lease clauses.
- To highlight unfair practices that can be used to enhance your bargaining position during negotiations.
Why use an accounting firm?
There are distinct advantages to retaining an accounting firm for your lease audit service:
- Required by the lease - More and more leases require that only nationally recognized CPA firms perform audits.
- Preferred by landlords - The BDO Corporate Real Estate Services reputation provides the Landlord with the confidence that the lease audit will be managed with professionalism and integrity.
- Resources and credibility - Many issues identified during the lease audit relate to the application of generally accepted accounting principles (often required by the lease). As part of a large national accounting firm, BDO Corporate Real Estate Services has the internal resources and credibility to support accounting positions taken.
What about potential conflicts of interest?
The Corporate Real Estate Services group provides lease audit and consulting services to tenants and does not represent landlords. As a result, we are able to avoid many conflicts of interest.
What is the best time to audit my lease?
The answer to this question depends largely on the audit rights outlined in the tenant's lease. There has never been a better time to evaluate your lease or review your escalation charges than right now. There are distinct advantages to performing a lease audit at different stages of a lease:
- Beginning of the lease term - Performing an audit early in the lease term documents and helps establish the methodology to be used by the landlord for the life of the lease. This enables tenants to maximize their savings and avoids mistakes that could otherwise compound over the lease term.
- Mid-term - By the middle of the lease term, escalations are likely to have increased and the landlord has adopted its methodology. It is at this point that an effective lease audit can provide the most significant benefit, with respect to both historical and prospective changes.
- End of lease term - At the end of the lease term, tenants will either be vacating their space or renewing for a new term. If the tenant vacates, it becomes difficult, if not impossible, to recover overcharges after the tenant's obligation to pay rent has ceased. Therefore, performing an audit prior to this time is critical. On the other hand, if a tenant renews its lease, a lease audit can provide the needed correction to prior mistakes as well as formulating the basis for future escalations. In either event, an audit at the end of a lease term may be the tenant's last opportunity to recover prior overcharges.
How will a lease audit affect the relationship with my landlord?
It is common knowledge that landlords are not enthusiastic about the prospect of lease auditing. However, most landlords have come to understand that prudent corporations need to verify expenses and correct overcharge mistakes. The BDO Corporate Real Estate Services history as part of one the nation's largest accounting firms reassures the landlord that the audit will be performed in an ethical and professional manner.
Our goal with clients is simple: You should only pay what is owed according to your lease, no more. The good news is that achieving this goal for your company doesn't have to be at the expense of your relationship with your landlord.
Does BDO Corporate Real Estate Services perform audits in my geographical area?
BDO Corporate Real Estate Services will perform lease audits in any location across the United States.
What will an audit cost?
We offer several different fee structures to accommodate the needs of our clients and comply with the limitations in their leases. Potential fee structures are:
- Contingency
- Hybrid
- Fixed fee
How do I get started?
BDO Corporate Real Estate Services structures its lease audit program to provide services with minimal disruption to our clients' organizations and personnel. All that is necessary to begin this process are copies of the lease documents and recent billing information. For a custom proposal and fee quote, contact us.
