10 Reasons to Audit your Lease
1. The Property is for SalePrior to selling a building, the lender will require the landlord to have all tenants sign an Estoppel Certificate certifying that the lease has been properly administered. Most leases require the tenant to sign an Estoppel on demand. An Estoppel can block the collection of overcharges incurred prior to its signature date. Even without an Estoppel, it can be very difficult to collect refunds for the prior owner's mistakes once the new owner takes over.
2. After Sale of Property
After the property has been sold, new ownership will often bring in new bookkeeping methods. Furthermore, a new owner will want to immediately increase the value of the building. The easiest way to do this is to increase the operating expenses passed through to the tenants. Each additional dollar passed through to the tenant will increase the
value of the property by 5 to 10 dollars.
3. The Management Company Changes
A new management company will often bring its own bookkeeping methods to your property. The standard lease for the building may be referred to, but your specific lease may not leave its file folder.
4. Your Lease Was Modified in Negotiations
If, during negotiations, you made changes to the landlord's standard lease, added exhibits or addenda, or if you used your own lease, it is likely that errors will be made. These changes represent more work to a busy property manager. A tenant's bills will often be calculated based on the standard lease for a property without reference to the actual, signed document.
5. Calculations Change or Inconsistent Billings
When the method of calculation of reconciliations changes, errors are likely. A lease should spell out the specific method of calculation to be used in tenant bills. These calculations should not change without adequate notice and explanation from the landlord. Inconsistency in these calculations suggests that the lease is not being followed.
6. Bills for Items that Do Not Benefit You
Assessments for items which do not benefit the tenant should be contested.
7. Sudden Large Changes
Sudden large changes in pass throughs should be examined.
8. Lack of Supporting Documentation
The landlord should be able to document each bill he has passed through to you.
9. Landlord Secrecy/Effort to Impede Audit
Landlord secrecy or efforts to impede an audit suggests there is something to hide.
10. Higher Than Average Costs
Your cost per square foot should be about the same as the industry average for your type of space in your city.
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