During the first and second quarters of the year, many tenants receive their operating expense, tax, porters’ wage and other pass-through charges for their leases. 

Unfortunately, although landlords are obligated to follow the leases when issuing these bills, it is the TENANT's RESPONSIBILITY to identify errors and bring them to their landlords' attention.  To make matters worse, the leases often have limited windows (some as short as 10 days) to object to an overcharge.* 

As a result, if the tenant fails to identify an error and unknowingly pays the bill without objection, the overpayment can become unrecoverable. 

Tips to help limit exposure:

1.   Review each of your leases and identify the types of pass-through charges that are called for.

2.   Identify prior years’ bills to determine the expected time of receipt for this year’s bill. 

3.   Identify the time periods that apply to the tenant’s right to object to an error in each lease.

4.   Identify the nature of the action that must be taken within the time period. 
For example:

• Must the tenant specify the nature of the objection?  If so, how detailed must it be? 
   

• Does the tenant have the right to audit the landlord's books to verify the components of the bill? 
   

• How does the right to conduct and timing of an audit coincide with the obligation to raise an objection? 

5.   Develop a protocol for issuing blanket objections to preserve rights to reclaim overcharges.

6.   Develop a plan to apply the appropriate level of review (including audits) for each bill within the time periods set forth in each lease.

Remember, most commercial tenants unnecessarily miss their annual deadlines and forfeit their right to recover rent overpayments.

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*For a more detailed discussion of lease audit deadlines, see our Article, "Negotiating Audit Rights in Leases."

ABOUT KBA LEASE SERVICES

KBA Lease Services specializes in controlling corporate real estate lease costs through lease auditing.  Formed in 1985, KBA (formerly Kislak Lease Services) pioneered the lease audit industry.  KBA has reviewed tens of thousands of leases and saved many millions of dollars for its clients.

Visual Lease® is KBA’s powerful, easy-to-use lease management software system.  Visual Lease has proven, for the past seven years, to be the best designed system on the market.  It is powerful enough to manage the most complex lease administration tasks, yet easy enough for novices to use.

CONTACT INFORMATION

Marc Betesh, Esq., MCR.h
President
888.876.6500 ext. 400
mbetesh@kbalease.com  

Anthony M. Beja
Vice President, Sales and Marketing
888.876.6500 ext. 430
abeja@kbalease.com 

©2007 KBA Lease Services, LLC. All rights reserved. No reprints of this article may be made without the written permission of KBA Lease Services, LLC.