Because a multi-page lease agreement allows for miscalculations and mistakes in future billing, your internal efforts in reviewing occupancy costs will certainly benefit from outside assistance.

Once your leased space exceeds 100,000 ft. you should generally expect your recoveries from an external tenant lease review to be at least .1% of your total occupancy costs from the preceding four years.  This is true for commercial, industrial, and retail leases.

The review goes deeper than a surface review of the lease abstract and drills down into granular detail to uncover unseen inconsistencies between what your lease agreement obliges you to pay and the amounts you were billed and actually paid.  Errors occur in a variety of component costs.

Tenent Costs

Of the countless ways landlords have overcharged tenants, here are a few…

  1. Landlord charges for unallowable according to your lease like Holiday/Seasonal Décor.
  2. Marketing and promotional costs misclassified as operating/maintenance costs.
  3. Repairs done to other units.
  4. Administration fees charged on management fees.
  5. CAM charges not directly related to the common area.
  6. Upgrade/capital improvements misclassified as maintenance.
  7. Expenses applied in a single year instead of amortized.
  8. Calculating CAM with denominator set at gross leased space instead of gross leasable.

Good tenant lease reviews require clear and courteous correspondence with your landlord. This is where DCI Solutions proves its value as we can partner with your internal audit team to ensure clear, pleasant, and effective communication that maximizes your refunds. Below is the type of correspondence we issue to property managers in the course of obtaining client refunds.

Dear ____________,

We are currently reviewing our occupancy cost disbursements and we have determined that, regarding our ______________ location, for the years 2008, 2009 and 2010 combined, we have incurred $64,937 in charges for which we are not liable pursuant to the terms of our Lease.

Section 4.3 of our Lease states that our Operating Expense obligation is limited to our prorata share of CAM costs in excess of the “Allowance.”  Section 4.3 of our Lease states that the “Allowance” is our actual 2008 Operating Expenses.

However, for each of the years 2008, 2009 and 2010 you charged us for our prorata share of all Operating Expenses causing us to incur $64,937 in excess costs as follows.

       

Correct

  

Excess Op. Expense
   

Billed to Tenant

  

Operating Expense

  

Billed to Tenant

Year

  

(Including Admin. Fee)

  

(Including Admin. Fee)

  

(Including Admin. Fee)

2008

   $21,903  

$0.00 (Note 1)

    $21,903

2009

                           $21,131  

$0.00 (Note 2)

                          $21,131

2010

                          $24,150  

$2,247 (Note 3)

                          $21,903
Total    $ 67,184    $ 2,247    $ 64,937

Note 1-The year 2008 is the Base Year

Note 2-Comprised of 2009 Operating Expense $21,131 less the 2008 Operating Expense $21,903, equals zero.

Note 3-Comprised of 2010 Operating Expense, $24,150 less the 2008 Operating Expense $21,903, equals $2,247.

Please review the contents of this letter and send a check or credit for $64,937 to my attention.

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