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There’s more to lease administration than just CAM Reconciliation!

Lease administration is an important process helping you stay on top of your lease portfolios. Typically, when we come across the term, lease administration, one of the first things that comes to mind is Common Area Maintenance (CAM) audit and reconciliation. However there’s a lot more to the lease administration process than just CAM reconciliation and lease audits. While CAM reconciliation is one the core tasks and most time-consuming, there are other equally important processes that are a part of lease administration. This blog post sheds light on them. They are-

Renewal notice processing

Renewal is the option to extend the term of the lease after the expiration of the existing lease term. Renewal clauses give the tenant the right to extend the lease term for a specified period of time and at a pre-defined rental rate. However, for the renewal to take effect, the tenant has to provide a notice to the landlord within the time frame specified in the lease. Sometimes, leases have automatic renewal clauses in which case, the lease automatically renews for the next term at a said rental rate if the tenant doesn’t provide a notice to terminate it. In both cases, as we can see, there’s a need to provide notice to the landlord within a stipulated period before the existing lease term expires. Lease administrators should track such critical dates and notice requirements and either alert the tenant about them so they can send the notice or send the notice on behalf of the tenant if the tenant has authorized them to do so.

Estoppel notice processing

Estoppel certificates are usually created by the Tenant for Landlord’s use. If the Landlord is in talks with a prospective buyer for their property, or with a lender who secures the loan with an interest in the said property, they may require the Landlord to furnish an estoppel certificate. The prospective lender or buyer of the property may use in their “due diligence” review of the property. The tenant is usually given a time frame of 10 or 20 days within which they have to submit the estoppel certificate to the landlord. Lease administrators in the tenant’s organization are responsible for timely processing of such estoppel notices.

Security deposit returns management

Security deposit is a lumpsum amount paid by the tenant to the landlord as a guarantee for the performance of lease obligations. Security deposits are usually refundable and returned to the tenant at the end of the lease term, provided there is no damage to the property and the tenant has fulfilled all their obligations under the lease. It is the responsibility of the landlord to refund the security deposit within the timeframe stipulated in the lease after the property is handed over back to the landlord by the tenant. If the landlord fails to return the security deposit on time, they are liable to pay penalty to the tenant along with the security deposit amount. Lease administrators on the landlord’s side are responsible for ensuring the security deposit returns happen on time, so the landlord is not in default and thus not liable to pay any penalty. At the same time, lease administrators on the tenant’s team are responsible for ensuring that the security deposit amount is received on time and is accurate.

Rent increase management

Lease administrators are also responsible for managing the increase in rental rates as per the leases. From the landlord’s perspective, their lease administrators are responsible for keeping track of rent increase dates, reviewing the lease clauses related to the rent increase, calculate the new rent as per those and then communicate the same to the tenants within the stipulated time period. At the tenant’s end, the lease administrator is responsible for reviewing the lease clauses related to rent increase and confirm if the rent amount increase specified by the landlord is correct and process the payment if it is accurate while contesting it if the landlord’s calculations are not accurate.

Subordination and non-disturbance agreement (SNDA)

From the landlord’s perspective, their lease administrators assist the landlord in generating SNDA for property sale or debt financing. From the tenant’s perspective, the lease administrators are responsible for updating their lease administration platform in the event of change of landlord or any other obligation related to the SNDA.

Commencement date letters

Lease administrators manage commencement dates and rent commencement dates as per the lease. From the landlord’s perspective, their lease administrators are responsible for reviewing the lease clauses related to commencement date and rent commencement date, keeping track of them and communicating the same to tenants. At the tenant’s end, the lease administrator is responsible for reviewing and updating the rent/lease commencement letters received from the landlord and updating them in the tenant’s lease administration software and process related rental payments accordingly.

Liasoning services

Lease administrators are also responsible for communicating with tenant/landlord/other parties for lease-related processes and ensuring such processes run smoothly and are taken care of on time.

Outsourcing your lease administration process or looking to hire a lease administrator? Make sure your new lease administrators are adept at all of the above services and not just CAM!

Rebolease.com, powered by RE BackOffice, Inc., is a premier provider of lease abstraction, administration, audit and accounting services. Headquartered in Pittsburgh, PA, we are a global boutique firm, providing high-quality services to top-tier clients across industry verticals, covering every type of lease and on any lease platform. We are proud to be a trusted partner, for 15+ years, to leading retailers, REITs, property owners/managers, and corporate accounts seeking a strategic advantage. All client projects are performed in-house.

Can you trust your lease support services vendor?

Staying on top of your lease portfolio is critical but also challenging. This is true regardless of the size of your lease portfolio, but it is even more complex if your lease portfolio is large containing hundreds or thousands of leases spanning across different countries or when the leases drafted in different languages. Outsourcing your lease abstraction, lease administration and other lease support services to an experienced, trusted lease support services vendor is a great way to overcome these challenges.

Outsourcing your lease support services helps you-

Save on costs that you would incur if you hired lease support service staff in-house, on your payroll. It helps you eliminate training, HR-related expenses and save on lease agreement interpretation and translation costs, as all of these are taken care of by the vendor.
Stay on top of your lease portfolio as you will have access to your lease support services vendor’s team of lease administrators even if your in-house team struggles to meet tight deadlines, especially if it is a bigger project.
Leverage the expertise and industry experience of your lease services vendor. They have more experience in handling multiple types of leases and tend to offer better accuracy, relevance, and compliance than in-house lease administrators who comparatively have lesser exposure.

While the benefits we discussed above look great on paper and do actually translate into reality, you need to make sure you pick the right lease support services vendor. From that perspective, here are a few things to consider when partnering with a lease support services vendor for your lease management needs.

Who are they?

The first question to ask before entrusting your leases to a lease support services vendor is, who they are. Are they a recognized, well-known, lease abstraction and administration services vendor?

Where are they based?

The next question pertains to their location. Where is your lease abstraction or administration vendor located? A lot of lease support service providers operate from off-shore locations. While that is okay, it is definitely a huge plus point for you if their office is located in the United States.

Do they do the work themselves?

This is a very important question. Before outsourcing your lease administration or lease abstraction requirements, make sure you confirm with your lease support services vendor that they are the ones actually performing the tasks. It is not uncommon for companies to undertake lease abstraction and administration projects and then outsource them further to a sub-vendor or even to freelance lease abstractors and administrators in a bid to cut costs. This is extremely dangerous as it puts you in a very vulnerable position as your leases travel all over the world sometimes–without your knowledge. And, if you are broker or a tenant rep managing your client’s lease portfolios, you risk legal action against you in the event something goes wrong.

Who are their clients?

Ask your lease support services vendor to furnish you with client testimonials and referrals. Make sure they are able to give you client names and contact information, so you can verify if the glowing client testimonials they provide are authentic.

How long have they been in business?

Make sure you don’t entrust your leases to a random fly-by-night start up that’s here today, gone tomorrow. Trusting such vendors with your critical lease data is not a good idea from the data security standpoint. Plus, you need a lease administration and abstraction vendor who can be a trusted partner and help you scale, as your lease support service needs grow or decline. While a newly found startup may be cheap, they usually do not have

The resources to support your lease needs as you grow
Stringent data security measures and may end exposing your critical lease data to risks of data theft and loss
The expertise and experience needed to handle complex lease data

Leases are critical business documents that are also confidential and legally binding. You don’t want your leases getting into the wrong hands! Make sure you partner with a lease support service provider with years of industry presence and experience that is trusted by your peers.

When to Commission a Lease Audit?

Lease abstracts are the backbone of your lease portfolio management process as they capture the essence of leases that otherwise run into hundreds of pages. By summarizing the key financial and non-financial data contained in the leases, lease abstracts make it easy for lease administration teams to stay on top of the lease portfolio. It ensures that lease administrators and lease portfolio managers don’t miss out on critical dates and payments, no legal obligations are violated and no opportunities provided in the lease is missed. However, a lease abstract will be able to serve these purposes only if it is accurate. Relying on a lease abstract that’s ridden with errors or is outdated will do more harm than good. This is where lease audits come into the picture. Lease audit is the process of verifying the accuracy of your lease abstracts and ensuring the abstracts are complete and up-to-date. Here are some reasons to commission a lease audit.

Your leases have been updated

If your leases have been amended, renewed or have had addendums included, it’s time to make sure your existing lease abstracts capture any relevant information from those. At this time, it makes sense to commission a lease audit and review the entire lease abstract in the light of the changes/modification to the original leases and make the necessary updates.

You are migrating from one lease administration system to another

If you are moving your leases and lease abstracts from one lease administration software to another, or even if you are making the big switch from spreadsheets to a more robust lease administration platform, it is a good time to do a lease audit on all your lease abstracts. As you invest in quality lease administration software with a view to streamline your lease management process, you don’t want to start off with outdated or inaccurate data. A lease audit ensures the information you move to your new lease administration system is accurate and useful.

You are are unsure of the quality of the lease abstracts in the first place

Lease audits can be used as a diagnostic and remedial tool if you are not satisfied with the quality of your lease abstracts. If you notice that your lease administrators are consistently having a tough time staying on top of critical dates, payments, notices, etc, and are scrambling for data in the last minute, there could be more to the problem than what meets the eye. If such misses are frequent, it could be indicating a problem at the very core of your lease database–the lease abstracts. Either your lease abstracts are inaccurate, meaning they don’t have the right information, or they may be incomplete in the sense that they may have not captured lease data that is critical to effective administration of the leases in your portfolio. A lease audit will help you figure out the root cause of the problem and fix it once and for all.

Lease administration challenges companies struggle with (And how to overcome them)

Lease administration consists of various lease-related tasks that must be undertaken to ensure the lease portfolio is up-to-date and also to make sure that the tenants get maximum ROI on their leases. End-to-end lease administration services include various activities such as-

Ongoing lease portfolio maintenance and management
Notice Processing
Critical date monitoring
Liasoning services
CAM Audit
Accounts payable and receivable
Abstraction of new leases and amendments
Lease audits to ensure accuracy of existing lease abstracts

However, it companies face a lot of challenges when trying to stay on top of their lease portfolios. Our blog this week discusses some of those challenges and the solutions to them.

#1 Cost-efficiency

Companies with in-house lease administration teams often find it difficult to justify the associated costs. While it is true that lease administration is a very important business function, there are substantial costs associated with hiring experienced lease administrators on the company’s payroll such as training, benefits and other HR-related expenses. Also, companies that hire lease administrators to tide over a temporary resource in requirement, such as during the annual CAM reconciliation period, or for a specific project such as lease data migration into a new platform, or at the time of major mergers, acquisitions or renewals, find it difficult to utlize them effectively after such projects are over.

#2 Resource availability and expertise

Qualified and experienced lease administrators are not only expensive to be hired on company payroll, but also hard to find. Plus, as discussed above, if you need lease administrators to tide over a temporary requirement, it is even more difficult to find someone who is willing to work for you at a reasonable rate, on contract.

#3 Tight deadlines

Most lease administration tasks are timebound. Examples include critical date monitoring, CAM reconciliation, account payables, etc., Companies find it difficult to keep up with the pace at which these tasks need to be completed, especially if they have limited in-house lease administration support.

Outsourcing lease administration is an effective solution to all the challenges discussed above. Outsourcing lease administration and other lease support services to a reputed lease services vendor allows you to-

Enjoy significant cost benefits

By working with a lease abstraction services vendor, you can save on costs that you would incur if you hired lease abstractors in-house, on your payroll. It helps you eliminate training, HR-related expenses and save on lease agreement interpretation and translation costs, as all of these are taken care of by the vendor.

Stay on top of your lease portfolio, no matter how short-staffed you are on the lease portfolio management front

Lease services vendors have a team of lease administrators at their disposal, which means they won’t be overwhelmed by the volume of your lease portfolio even if it runs into thousands of leases, and will be able to deliver on time. Your in-house team may struggle to meet tight deadlines especially if it is a bigger project.

Benefit from the expertise and industry experience of your lease services vendor:

Vendors who provide lease services are specialized in what they do. It is their bread and butter, so they are naturally well-versed in the latest industry trends. They have more experience in handling multiple types of leases and tend to offer better accuracy, relevance, and compliance than in-house lease administrators who comparatively have lesser exposure.

Making the most of lease renewals

Renewals are a key component of your lease agreements. Lease renewals present you the opportunity to get out of leasing situations that are not in your favor, while allowing you to reap the benefits of really great lease deals. Renewals also offer scope for renegotiating lease terms and conditions. Missing out on lease renewals can mean termination of the lease, which, when unforeseen can be a huge financial loss for the tenant. In our blog this week, we discuss some best practices that you can adopt when it comes to lease renewals. Following these best practices will ensure you make the most of your lease renewal options and enjoy better ROI on your leases.

Critical date monitoring for renewals

In order to benefit from a lease renewal option, you need to exercise it within the timeframe stipulated in your lease. Make sure you invest in a lease administration software platform which captures important dates such as the last date for exercising lease renewal options, and also generates alerts in a timely manner so you have the time to think through, calculate and take a well-informed decision regarding the renewal. This process ensures you don’t miss out on the opportunity to renew your lease.

A quick lease review

Lease renewals are a great time for a quick lease audit and review. Using your lease abstracts, you can quickly go over the key financial and non-financial clauses of your lease and decide if you should be negotiating on any of those. This is a good time to make amendments or include any addendums to your existing lease. You could also get a financial modeling done on your lease to compute the long term ROI on your lease, helping you determine if the renewal is a good fit for you.

Get assistance if you are overwhelmed!

While it may sound easy, it becomes complicated when you have a large lease portfolio. When you have thousands or even hundreds of leases with different renewal dates and varying terms and conditions, it can get overwhelming. If that sounds familiar, you should reach out to a trusted lease support service provider who can take care of this for you. A lease administration services provider will have a large team of experienced lease administrators who can help you stay on top of your lease portfolio irrespective of its size.

What to consider when investing in a lease administration software?

Investing in a lease administration software is a must to stay on top of your lease portfolio and for efficient ongoing lease management. While there’s no doubt that lease administration software programs are indispensable, things start to get a little tricky when it comes to selecting a lease administration software. Our blog this week discusses the key elements you should consider when choosing a lease administration system.

Compliance

Compliance forms a big part of your lease management process. You need to make sure that your new lease administration software helps you meet the compliance requirements as per lease accounting standards such as FASB ASC 842, IFRS 16 and GASB 87. On the same note, it is important to ensure your lease administration software caters to the different kinds of leases in your portfolio, such as real estate, equipment, vehicles, etc.,

Ease of use

For any tool to be adopted and utilized fully, ease of use is an important factor. The lease administration software should allow you to easily manage every aspect of lease management including lease abstraction, lease audits, critical date monitoring, rent roll, CAM audit and reconciliation, etc.

Reporting and dashboards

Your lease administration platform must be intuitive and flexible. It should support report generation of various kinds, allowing you to make sense of the rich data contained in your leases and lease abstracts, thus bringing more objectivity to the critical business decision-making process.

Import and export functionality

One of the most important elements to consider before investing in a lease management platform is the import-export functionality. It dictates how your data will be shared and in what format. The information from your lease abstracts will be used across various teams in your organization such as Finance, Operations, IT, Accounting, Legal, etc. Before you purchase a lease management software, you need to make sure it is compatible with their data format requirements.

Data storage and security

One of the questions to seek answers to before you purchase a lease administration software is, “Where your lease data will be stored by the lease management platform and in what format?”. For example, is the data stored locally, or on the cloud? What are the security concerns and how are they being addressed by the lease management software vendor? Getting answers to these questions is a must when evaluating a lease administration software platform.

Service and support

Investing in a lease management platform is a big decision. You will be using the platform to store critical business information and will need uninterrupted access to it at all times. Hence after-sales service and support become critical components when evaluating lease management platforms. What kind of support does your lease software vendor provide? What is their availability? Is the service and support free, or will you be charged? It is very important to get these questions answered to your satisfaction before invest in a lease administration software.

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