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Unless your tenants are on a gross lease, it’s time for annual reconciliations. Depending on how the lease is structured, you may have tenant recoveries for taxes, insurance, CAM and percentage rent. Most leases have a set date that the landlord is required to notify the tenant of increases, decreases and 2022 estimates. Failure to provide tenants with timely notices can impair a landlord’s ability to recover those monies.
Landlords lose millions each year from not understanding or enforcing the lease clauses that entitle them to recover expenses. Using the right commercial management company can ensure that you are maximizing tenant reimbursements and that you are in compliance with tenant leases.
Did you know… You may have the right to recover Property Management fees!
M&D Property Management has the understanding, trained staff, and procedures to streamline this process saving property owners significant time, effort, and money.
One of the main points of lease negotiations are expense reimbursements and landlord recoveries. Whether it’s percentage rent, cap on CAM, base year stops, or excluded expenses, it’s important to understand the complex and varied aspects of tenant leases.
Another challenge with tenant recoveries is the tenant’s pro-rata share. Tenant’s reimbursement percentage is generally based on a formula calculated to determine what percentage of the recoveries each tenant is responsible for. While a tenant’s pro-rata share may seem straight forward, the actual calculation of the formula is often quite complicated as the formulas will typically contain excluded areas and occupancy factors within the calculations.
Most of the time “audit” is a dirty word, but not always.
Tenants have the right to audit landlord’s records used to calculate recoveries. Meticulous bookkeeping and detailed records are imperative as discrepancies or missing documentation can result in the tenant’s right to charge the landlord their audit fees and can infringe on the landlords’ ability to collect the recoveries in question.
On a more positive note, regular audits of utilities, vendor contracts and services can save both landlords and tenants money. Property managers are experts in shopping rates and re-bidding ongoing maintenance to ensure the lowest rate with the highest level of service.
At the end of the day, annual reconciliations can be difficult and a long process. However, it’s important to the landlord and tenant that all accounting is completed accurately. Remember, tenants can audit the process so all t’s should be crossed and i’s dotted. Also, you risk losing out on a great deal of income if you aren’t properly passing on charges back to tenants that are part of the lease agreement.
Need help with landlord recoveries? This is just one of the many areas where M&D Property Management Group serves its owners and partners. If you would like to learn more or need assistance as we near the end of the year, be sure to give us a call anytime. We are more than happy to answer any questions you may have on the process and tell you more about our services and how we can help.
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