Commercial Lease Audit Project Overview
An insurance group and law firm in the same building on Staten Island, New York thought they might be overcharged for their annual Common Area Maintenance (CAM) expenses or additional rent due to the landlord.
They were looking for a partner with the expertise to deliver a meaningful commercial lease audit of these costs to determine if they were paying the correct additional rent.
Our first goal was to identify and analyze all of the expenses that the landlord had charged their tenants that were permitted in their lease. The audit provided expense items that needed clarification. First, the landlord’s architectural drawings showed a common area core factor for the building of 8% yet the CAM invoices showed that figure to be 14%. Both tenants were being overcharged by 6% just because the wrong core factor was being used. Both leases had exclusions for capital expenses to improve the landlord’s property, yet both were charged their share of this expense. There was an exclusion for real estate taxes for the first ten years of their lease.
When reviewing the current year, we found that they were charged for real estate tax expenses. We then went back and reviewed the entire lease term for both tenants for both the appropriate sharing percentages and to remove these exclusions. The final error that we found was that the landlord was double charging for janitorial services. Both tenants paid their share of this expense monthly. In addition, the landlord also charged them for this service on their annual CAM expense statement.
Both tenants received reimbursements and rent credits from the landlord for the overpayments. The insurance group received a $68,450 reimbursement and a month of rent abatement. The law firm received a check for $128,000 and three months of rental.