Office leases require that tenants pay for their pro-rated share of building operating expenses, taxes and utilities. Frequently, these costs are treated by tenants as natural, on-going expenses. Actually industry sources indicate that 90% of office lease operating expense pass-throughs have errors. Worse, tenants not knowing if an expense bill is accurate or how to deal with it, typically just pay and forget it. In truth, most landlords know this...depend on it actually. Until now.
A lease audit analyses operating expense pass-through charges for accuracy. A rigorous lease audit of the landlord?s accounts and records reviews their accountability, accuracy, market comparisons...in some cases, landlords purposeful bad acts. (See Examples)
The lease should also have language in it which requires that the landlord agree to and accommodate lease audits. Landlords groan about the time and expense. At the very least, get language into the lease which 1) allows any individual lease audit to cover ALL expenses during ALL years of your lease, and 2) provides that the landlord be required to pay for audits (or at least some or one of them - and in every case when the expenses were proved in error). Some leases say that once the tenant fails to notify the landlord of its desire to review the expenses, the opportunity is lost forever. Remember - they wrote the lease in the first place for a reason.
Misquoting Operating Expenses as part of the Rent can be considered misrepresentation or fraud. A strong audit person or company will use this specter if needed to affirm or denounce the validity of the expense bills.
Only a small percentage ever requires legal action, especially if the audit is performed thoroughly. And once your landlord knows and understands you intend to perform evaluations either annually of as a surprise, their bad habits usually clean up.
Better yet, sharing results with other tenants can provide an opportunity to prepare a joint review.
Let the professionals do all the work, and more importantly present any claims to recover overpayments or over-charges.
