Case Studies

Lease Audit Case Studies

Case 1 – Low Base Year Results in Overcharges to Office Tenant

Occasionally a tenant watches current charges while forgetting how important the base year is. One tenant assured us that the current operating expenses were fine, and he was right. However, upon review, RBJ found that the the base year did not include supplemental property tax amounts that were received after the base year. Neither was the electricity properly grossed up in the base year. This resulted in a refund for each year the tenant had been in the building, and would continue to generate future savings.

Case 2 - Special Allocation to Majors Hurts Tenant in Retail Center

A retail tenant's lease called for them to pay their pro rata share of CAM expenses, on the condition that any tenant who contracted separately for any service would be excluded from the calculation for that service. Upon review of the CAM and back up documents, RBJ found that the major tenant in the center did not contract directly for many expenses, but was receiving a reduced share from the landlord. We were able to correct this error for the tenant resulting in a substantial refund and future savings.

Case 3 - Inaccurate Square Footage Results in Overcharges to Retail Tenant

A tenant was paying his pro rata share of expenses based on the landlord's stated total square footage. RBJ accessed some outside sources to confirm that the landlord was understating total square footage. We were able to reduce the pro rata share of this tenant from 8.4% to 7.6%.

Case 4 - Non-BOMA Measurement Results in Overcharges to Office Tenant

An office tenant's rentable square footage was calculated by the landlord based on a load factor derived from the square footage of the entire building. This tenant's lease indicated that all measurements would be in accordance with BOMA Standards. BOMA requires that building load factor is calculated on a floor-by-floor basis, not a building average. The BOMA rentable square footage was 4% less than the rentable square footage figure used by the landlord.

Case 5 – Mixed Use Complex causes Electricity Overcharges

Through an onsite electricity audit, it was determined that the yearly electricity expense for the Center was higher than industry rates for outdoor area lighting. It was then determined that one of the meters included usage for the premises of a small office building located in the Center. As a result of this discovery, RBJ was able to get the landlord to agree to an electricity pass through based on the number of light poles/light fixture/light type located on the client’s outside premises multiplied by the applicable outdoor lighting rate.

Case 6 - Property Taxes on a Mixed-Use Center not Segregated

A 5,000 square foot retail tenant was located in a shopping center that included retail space and residential apartments. The apartment portion of the building was separately assessed from the retail portion of the center, but the landlord included all parcels in the property tax bill to the tenant. RBJ was able to recover a $70,000 refund for the tenant, and substantial future savings as the residential portion of the center was excluded from the total.

Case 7 - Special Assessment to Pay for Capital Construction of Shopping Center

A special assessment was included on the property tax bill for this 8,000 square foot tenant. RBJ researched the assessment with the county, and the city, and found that this special assessment was created to pay for the capital construction of the shopping center. The lease specified that original construction was the landlord's responsibility, and RBJ was able to recover a $45,000 refund as well as future savings each year due to the exclusion of this special assessment from the property taxes.

Case 8 - Landlord excludes Certain Parcels to Detriment of Other Tenants

One RBJ client had negotiated to pay their pro rata share of all property taxes on the entire shopping center. However, the landlord excluded several parcels from the calculation. The exclusion of these parcels effectively increased the average cost per square foot that was passed through to the remaining tenants. RBJ obtained the necessary documents from the county offices to determine the total property taxes assessed against the shopping center, and recalculated the tenant's share based on the total square footage of the center and the total property taxes on the center. This resulted in a large refund for past years and continuing savings each year in the future.

Case 9 - Careless Calculation of Common Area Taxes Results in Double Billing

One retail tenant occupied the only building on a parcel within a shopping center. The lease called for this tenant to pay 100% of the property taxes on their building plus their proportionate share of the common area taxes in the center. The landlord passed through 100% of the taxes on their parcel disregarding the large amount of common area on the parcel. In addition, the landlord passed through the tenant's pro rata share of the common area on the remaining parcels. RBJ was able to separate the building taxes from the common area taxes on the tenant's parcel. The common area taxes on that parcel were then added to the remaining common area taxes and passed through to our client at their pro rata share instead of 100% as before. This resulted in a $25,000 refund and future savings.

Case 10 - RBJ Identifies Problem Leases for Client

One RBJ client had a portfolio of 3,000 leases. Using just a list of addresses, RBJ was able to use our own resources such as our property tax database, shopping center directories, etc. to identify which leases had a high probability of overcharges. This enabled us to start with the most problematic leases first.