Landlords and tenants engage in lease administration activities to manage their CRE portfolios. The goal is to reduce the risk of missing critical dates and payments. But are lease administration functions effective and efficient? The answer is no. Many companies are struggling with increasing lease admin operations costs and the problem of missing data.
In this blog, we will look at the 7 common reasons the lease administration department may not be functioning as it should.
- Lease abstraction error
Lease abstraction is the process of extracting critical data which involves obligations. If any information is overlooked or lost during this process, there could be monetary losses running into thousands of dollars.
- Lack of compliance with lease accounting standards
The new accounting standards mandate the abstraction of additional data points, which may mean that leases need to be abstracted again. This is a burden on a company’s financial resources. Additionally, non-compliance will attract penalties.
- Lack of process and evaluation
Developing and implementing a productive lease administration process is important for the successful functioning of the lease administration department. Equally important is the consistent evaluation of the processes. This exercise is important to ensure the steps involved are not redundant and are producing the desired results without losing any critical information.
- No system or too many systems
Investing in multiple software capable of catering to lease data management, document management, financial analysis, and accounting is important for any company to improve its efficiency. However, constant evaluation of this software is vital to ensure they are not redundant and are up to date.
- Wrong people on the staff
Expertise in lease abstraction and lease administration tasks is mandatory for the smooth functioning of the lease administration department. Staff performance should be reviewed regularly to ensure they understand and conduct their duties effectively.
- Lease translation
Global portfolios necessitate the translation of leases, and many companies do not have skilled resources to undertake this translation function. Service providers, who understand real estate, can accomplish this task economically.
- Lack of coordination between departments
A lease administrator’s role has broadened considerably as a result of the additional tasks that previously fell under the purview of the legal, accounting, and finance department. But to accomplish these additional tasks, there is a need for transparency and coordination between the lease administration department and all other departments.