The Interplay between Lease Auditing and Lease Administration
Although lease administrators do a great job in reviewing and paying rents every month, it is very difficult for them to identify every billing anomaly that may exist. Lease auditing complements and extends a company’s lease administration function by ensuring that costs are controlled to the highest practicable level.
Lease administrators don’t only pay the rent. They also abstract new leases and amendments, manage the database, keep track of critical dates and prepare documents and management reports. Unfortunately, staffing and budget limitations and the continuous pressure of meeting payment due dates prohibit them from spending a lot of time investigating every billing abnormality. And that’s the same whether a company’s lease administrators are internal or outsourced.
That’s where lease auditing comes in. Lease auditing picks up wherever a company’s lease administration function leaves off by providing a deeper level of review, analysis and recovery tailored to each lease’s unique circumstances. Lease auditors employ a host of additional tools, including field audits, market analysis and legal research to unravel an array of deeper issues such as abnormal fluctuations in costs, ambiguous lease language, questionable property management practices, and the like.
While it is obvious that putting more time and effort into reviewing bills will reduce the incidence of overcharges, it is not always clear that the return will be positive. Without some level of control, a company could spend significant resources auditing leases without ever realizing any savings.
Fortunately, most audit firms will absorb this risk by offering their clients the option of working on a contingency fee basis, only charging for their services to the extent they are successful in producing savings. The economics of such a relationship steers resources to leases where claims are more likely, and drives effort to the appropriate levels. In fact, over time this arrangement pushes audit firms to improve their skills because it improves their performance and ultimately their fees. Firms with higher skills are better equipped to understand the more complex leases, are more discerning about the issues they identify and pursue, are more adept in working within existing landlord-tenant relationships and are more successful in resolving claims.
For the company, having a team of skilled lease auditors perfectly complements its existing lease administration functions. As its lease administrators are tending to deadlines, operational functions and other immediate demands, the lease auditors are feverishly delving into the intricacies of the leases, analyzing every aspect in search of discrepancies, abnormalities, and/or oversights made by their landlords. A cohesive relationship between these two teams almost always results in the net reduction of a company’s operating expenses and a positive impact on its bottom line.
Lease auditing extends the effectiveness of a company’s lease administration function and preserves corporate assets by maximizing control over leasing costs. Given that there is never enough time for a company’s lease administrators to dig into every potential issue, it is the only cost-effective way for a company to ensure that it is not paying more than required under its lease agreements.