You’ve Had a CRE Lease Transaction. Now What?

Your Commercial Real Estate Lease Transaction is Finalized. Now What?

Part 1: The Power of Notifications

Your lease transaction is finalized, your broker has moved on, and you’re on your own. Now what? It’s common practice to file your lease in a drawer until it comes up for renewal, but the reality is you need to manage it for its duration. Along with critical data and responsibilities, your lease contains critical response dates that are non-negotiable and profoundly impactful to your business and your bottom line. Many organizations overlook them.

Why? Lots of reasons. A broker’s mandate is to engage with you when a lease is up for renewal, or you’re subletting – a time gap that can span five, ten or even 20 years. Lawyers and insurance partners’ only interest is in the clauses that affect them. Administrators stay on top of renewals and critical dates, sometimes with out-of-the-box or customized built-out software to help them.

Here’s the problem. Other lease life cycle events are overlooked and can significantly impact your costs and recovery, flexibility, timely action and negotiating power. These include renewals, tenant inducement payments, audit rights, operating cost challenge rights, audit timing, inducements, insurance certificates, first rights of offer and more. For example, fifty percent of lease costs are base rent; the rest are operating costs and taxes. When leasing tens of thousands of square feet with a long-term lease, the cost of a missed deadline, late review or response or landlord error can compound exponentially over the years.

The devil is in the detail

CRE leases and associated documents can be 80 or 100 pages or more. They differ from landlord to landlord, location to location and are loaded with critical data that is often neglected. This can result in unforeseen costs.

Reviewing the lease and capturing these critical dates is essential. Comprehensive abstracting of all lease documentation ensures that those notifications are captured and tracked. Missed notifications during your lease life can leave you too late to challenge, question, react, review, respond or make financial recoveries. A customized notification tool ensures this never happens.

The power of lease lifecycle notifications

Every date matters.  Leases are written to the landlord’s advantage and loaded with deadlines tied to everything from annual operating cost statements to tenant reviews.  Miss one, and you may forego the ability to challenge or change any item on it. Missing an opportunity tochallenge may indicate acceptance. Furthermore, landlords make billing errors. Left unchecked, they often repeat those errors, adding to significant overpayment by the tenant.  We recently picked up on this with a client whose original lease included an initial charge escalated annually by the Consumer Price Index (CPI) inflation.  The landlord made an error in the base year calculation that compounded over the years, and because deadlines were missed, full recovery was limited to the current year only.

It is important to be cognizant of key dates and implement notification tracking to maximize your company’s ability to take timely action for all cost savings, speed up recovery, enable strong decision-making / better planning and create greater negotiating power. An automated notification tool to track critical lease dates is just one of a range of customized services that CREiQ provides to support your business throughout your lease lifecycle.

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