Practical advice on ways to improve control over your company’s real estate costs.

Why you need to comb through your leases’ Operating Expense bills Gone are the days when tenants could comfortably rely on their landlords to follow the leases when billing ancillary charges such as operating expenses, taxes and sundry charges.  In fact, as the real estate market has softened, landlords are devoting more time and resources [...]

Discussion between Andrew Zezas of SIOR NJ and Marc Betesh of KBA Lease Services. Together they outline the upcoming changes to lease accounting under GAAP and their potential impact on commercial real estate, developers and occupants.

FASB and IASB announced on July 21, 2011 that they will re-expose the lease accounting proposal containing their revisions and tentative decisions thus far, further delaying final implementation of these highly controversial rules.

Gross-ups are adjustments to building expenses that are made when such expenses are below normal levels because of building vacancies and other factors.

According to industry chatter, it is looking quite likely that the FASB plans to continue to re-deliberate crucial issues based on the steady flow of industry opinion and data received from comment letters, roundtables and outreach initiatives.

Duke Long interviews Marc Betesh about upcoming FASB changes at Corenet’s Chicago conference. 

The process of accommodating many of the suggestions from the public roundtable and workgroup meetings is underway and significant positive changes to some of the more controversial and costly proposals have already been tentatively agreed to.

There has been significant activity in the corporate real estate industry regarding the proposed changes to lease accounting rules by FASB and IASB. This LeaseTip™ provides an index for locating various useful resources on the topic, including PowerPoint presentations, articles, and other materials.

KBA has received numerous responses to our latest Lease Tip, The Impact on Corporate Real Estate of Lease Accounting Changes under GAAP.  We are preparing to provide comments to the FASB/IASB exposure draft regarding the following aspects of the changes and would like to invite you to join us. LET YOUR VOICE BE HEARD BY [...]

The commercial real estate industry is abuzz with the proposed changes to lease accounting under generally accepted accounting principles (GAAP). Why the Changes? The FASB and IASB are trying to eliminate a “form over substance” distinction in GAAP accounting that has led to confusion and potential misuse in financial statements. The Proposal will require significant adjustments to the treatment of Gross and Modified Gross leases, which constitute the majority of commercial office leases in the U.S.

Most landlords employ a CPA firm to prepare the entity’s financial statements and tax returns. In many cases, a segment of the financial statements that are issued are delivered to tenants in support of their operating expense pass-through billings. Tenants must be careful to not rely on these statements to protect their rights.

Tenants often think that the only risk of deferring an audit of their lease this year is that they may be unable to recover any of this year’s overcharges.  In fact, skipping a year of reviewing your charges can have a profound impact on your costs for the balance of your lease term. Here’s why. [...]

Landlords are devoting more time and professional resources to increase revenue. As evidence of this, landlord-oriented articles are appearing in various publications suggesting how to uncover hidden income from tenants through greater attention to tenant pass-throughs. Now more than ever, tenants should be reviewing their leases and bills to make sure they do not contain overcharges or errors. Here are 6 reasons why tenants should increase their vigilance with respect to operating expenses and other pass-through charges.

Landlords and tenants often argue over lease audit rights in leases. Landlords seek to restrict the tenants’ right to audit by imposing restrictions on an otherwise open right. Tenants seek to ensure that they have a practical, workable clause that will enable them to verify their costs. Michael E. Meyer, Esq., one of the country’s leading leasing attorneys and partner at DLA Piper LLP (US), has developed this checklist of issues that should be covered in a well-negotiated lease audit clause.

Landlords don’t like lease audits and push very hard during lease negotiations to restrict tenants’ ability to audit their leases. Many tenants succumb to this pressure, without realizing that that these restrictions often undermine all of the protections that were negotiated into the operating expense escalation provisions. This article examines some of the arguments landlords commonly make with respect to restrictions on audit rights.

So you’ve got your leases abstracted, imaged and into a database or spreadsheet and life is good. You and your broker are handling renewals and the information to answer basic questions is at your fingertips. Then someone asks you a seemingly simple question: “What do we pay on average per square foot?” At first glance, it has a simple answer; or does it?

Caps on operating expenses, taxes and similar costs in commercial leases are often misunderstood. Much of this is because of a lack of consistency in defining the different variables at play. As a result, caps are often confusing and difficult to administer.

In real estate, some of the most commonly used terms are “Net Lease” and “Gross Lease.” This article discusses structures such as net, gross, modified gross and hybrid leases. Because of the many different variations on lease structures, it is important to understand what these terms refer to and how they should be used.

The Lease Tips™ Archive includes the following articles. For full access to the archive, please click “Get Lease Tips™” to subscribe.

Checklist for Negotiating a Fair Lease Audit Provision
Succumbing to Landlord Pressure to Limit Lease Audit Rights
Which Leases Are Good Candidates for Audit? — How to Identify the Key Indicators
Lease Administration vs. Lease Auditing
Commercial Lease Occupancy Cost Measurement
Expense Escalation Caps
Stop Giving Away Your Audit Rights
It’s That Time of Year Again
Due Diligence: The Foundation of Lease Auditing
What Happened to that Great Lease You Negotiated?
Don’t Get Shocked by Your Electric Charges
Don’t Pay Twice for a Better Building
Reminder: The Clock Is Ticking…
Prepare Your Budgets Properly
Protecting Yourself in Base Year Leases
A CPA Certification is Not Enough
Criteria for Selecting a Lease Audit Firm
Lease Auditing: What Is It and How Does It Work?
How “Grossing Up” Operating Expenses Affects your Lease Costs
Cost-Reducing Capital Expenditures
Audit Deadlines Come in All Forms
Sarbanes-Oxley and Control of Corporate Real Estate Leases
Demystifying the Difference between Net and Gross Leases
Capital Expenditures – Includable or Not?
Negotiating Lease Audit Rights
Measurement of Square Footage
Carefully Constructed Rent Escalation Clauses Help Avoid Landlord-Tenant Disputes
Negotiation Skills: The Most Important Ingredient in Lease Auditing