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Lease Administration Best Practices for Businesses

By Michael Cavell

What to do when you have outgrown the usefulness of a Microsoft Excel spreadsheet

It is truly remarkable, and just a bit worrisome, how many people use Microsoft Excel to keep track of their real estate lease information. While it works well if you are only tracking a few key dates and terms for one or two leases, if you have six or more locations, Microsoft Excel is definitely not the best solution to monitor one of the biggest expenses for your company. Here are three reasons why:

1. It can’t track all important minute lease details.

With Excel, you are going to capture what you think are the key dates and basic terms of each lease. Maybe you list the security deposit and the rent schedule, which takes up 6, 7, maybe 8 columns, and that’s about it. Except the lease is 84 pages. You will almost certainly be missing numerous important details that really need to be tracked.

2. Excel is a passive data storage system.

It only works if (or when) you remember to open the file and update it. Most executives are too busy to find and research their leases in order to double-check what should be charged and passed-through them by the landlord, and they instead choose to simply trust the invoice provided by the property manager. The problem here is that most invoices have errors–and nearly 100% of the time it results in tenants paying more than they should.

3. Excel is definitely not the best tool for tracking the myriad details in lengthy leases across multiple properties.

Every time you get a statement from your landlord, you need to remember the relevant provisions of the lease to give that bill some context, so you can decide whether it is fair and reasonable. But again, the lease could be 84 pages or more. For example, you might get one letter about operating expenses, and need to remember what the lease indicated in section 12, then you receive an estoppel certificate, and you need to remember what it indicated in section 42. Or, you get a tax notice, and need to remember what the lease stated in section 28. Over the full-term of the lease, how many times will you need to retrieve the lease, find the correct section and review the language to try and determine whether the landlord got it right? This presents an extensive chance for errors and unfortunate overcharges that could cost your business thousands (if not millions).

What’s the alternative to tracking real estate lease information?

As explained above, while Excel is an extremely useful program, it wasn’t created as a tool to monitor lease dates for businesses, and can open the door to costly mistakes. This is why it’s important to have a dedicated in-house team member who understands the lease(s) inside and out, who can properly compare statements to ensure the business is being properly billed. If a business doesn’t have an in-house team member for this role, we heavily encourage hiring an outsourced experienced lease administrator as an extension of their own team, that specializes in monitoring leases and identifying any errors that can save money. At Hughes Marino, our best practices for onboarding a new Portfolio Lease Administration & Advisory (PLA) client are as follows:

  • Abstract the lease(s) to identify and capture key clauses and lease sections for better accessibility in a searchable system.
  • Upload the lease to a secured cloud, using our professional-grade lease administration software.
  • Utilize advanced and accelerated searching for key words to make information retrieval effective and efficient.
  • Enter all key reminders connected to dates and penalties, including critical terms and conditions.

As a trusted advisor, it’s important that we provide timely and accurate information. Our team builds ‘fail-safes’ into our processes, allowing our clients peace of mind that the data is validated and that all critical components have been addressed.

Of course you might consider providing the operating expense statements to your accountant or controller, but understand that they are not lease administrators and almost certainly not experts in real estate leases. It is likely not the best use of their time, and expecting them to become expert in an esoteric sub-domain of commercial real estate is just a bad idea. Another option could be to hire your own full-time, experienced lease administrator, if you want to take on another full-time salary with benefits. Our team has a combined more than 100 years of lease administration experience; we’ve seen a few things and we are here to help.

With the confidence that your leases are being professionally monitored and managed, you can focus on your business and your people–and that is the very best way to excel.

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