Many tenants are retaining outside firms to audit their leases, and a number of firms are now offering lease auditing services to their clients. This article outlines several key criteria for selecting a lease audit firm.

The Modified Gross Lease is the most favored form of lease for multi-tenant office space. However, if not drafted properly, a modified gross lease can cause a tenant to pay significantly more than understood by the parties when the deal was negotiated.

When preparing budgets, it is imperative to realize that a tenant’s liability for its share of increased operating expenses can rise at a completely different (and much higher) rate than the building’s expenses. Although building operating costs may inch up by only 3-4% per year, your liability will usually more than double the first year and rise thereafter by around 50%, 33.3%, 25%, and so on.

In January, many tenants will start receiving their operating expense, tax, porters’ wage and other pass-through charges for their leases. Unfortunately, many tenants unnecessarily miss their annual audit deadlines and forfeit their right to recover rent overpayments.

Tenants are often attracted to buildings because the buildings are undergoing renovations or other improvements to systems, appearance or operations. However, in base year leases, tenants can find themselves paying twice for maintaining these new improvements, and must protect themselves in their lease language from such an occurrence.

Electric charges are a significant part of building operating costs. Most leases require the tenant to pay for electricity used within the premises for lighting, computers and other equipment. Except for very large leases where the tenant usually shops rates directly with utility suppliers, the tenant’s electricity charges are governed by the terms of its lease. Given the high volatility of utility rates, these costs must be monitored to ensure ongoing compliance with both the spirit and letter of the lease.

It snuck away when you weren’t looking! You spend countless hours negotiating a lease, getting it just right. And then something happens. When administering the lease you forget how hard you worked and lose control over it. Remember, negotiating a lease is not an academic exercise. If you do not keep control over it after it is signed, you will lose what you so strenuously fought for during negotiations.