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Tips
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Negotiation Skills: The Most
Important Ingredient in Lease Auditing |
In the final analysis, the value of lease auditing is measured by the
amount of overcharge claims that have been recovered for the tenant. To
achieve that success, lease auditing cannot rely exclusively on accounting
and auditing skills. It needs to supplement those disciplines with legal,
architectural, building management and general business skills, in
particular the ability to negotiate a resolution that satisfies the tenant's
objectives.
Much has been written about the auditing techniques and procedures
employed in the examination of bills and landlords, books and records.
Numerous examples of areas where potential overcharges may occur have been
cited. Without this foundation of painstaking examination and
discovery, no legitimate claim for the recovery of overcharges can be
developed. However, once such a basis for a claim has been established, the
onus is on the lease auditing firm to negotiate a recovery that satisfies
both the tenant and the landlord. Only after this negotiation is completed
will it be possible to assess the success of a lease audit.
Claims that arise from mathematical errors usually
are easily resolved. Those audit claims that are based on perceived errors
of interpretation and those in which the original charge is not believed to
be fair and equitable, require complete documentation and usually involve
protracted negotiation. Only through complete documentation and persuasive
negotiation can such claims be resolved to a tenant's satisfaction. Not
surprisingly, the resolution phase is the most time-consuming aspect of the
lease auditing process and one that demands a high level of proficiency.
It is possible that the tenant may elect not to pursue the
ultimate potential refund from a landlord because it deems that such action
would not be in its best business interests. Perhaps it is contemplating
future transactions with the landlord, and believes that by "leaving
something on the table," it will maintain goodwill that will further its
future negotiating position. Similarly, the tenant may value its
relationship with the landlord and, therefore, decide not to maximize its
recovery if it believes that this relationship would be jeopardized as a
result.
With these caveats in mind, there are three primary
factors that should govern the actions of the negotiation/lease auditor:
1. There is no substitute for facts. In order
to prove the validity of any overcharge claims, it is essential that the
facts uncovered in the audit be provable.
The quality of the audit findings is the first
imperative to any successful negotiation. The negotiator must know and
believe in the validity of the audit findings.
2. All claims must be reasonable, equitable and
supportable. Because many of the claims that arise from audits are
based on interpretations of lease clauses and other intangible factors
such as fairness and equity, it is important to fully support each claim
with logic and reasonableness that will withstand counter-conclusions.
Unreasonable claims for which there is dubious support will not only be
rejected but also mitigate the likelihood of acceptance of more
realistic claims. The credibility of the lease audit firm is a
contributing factor to any successful negotiation, and such credibility
is only established if its positions are reasonable, equitable and
supportable.
Fairness must be the overriding criterion of any lease
audit claim. The lease auditor is seeking a fair resolution from the
landlord. Should this fairness criterion be exceeded, considerable
damage can be caused to the tenant/landlord relationship.
3. Be alert for opportunities for creative
resolutions. There are innumerable ways to settle a dispute arising
from a lease audit. The negotiator needs to know what would best serve
his client's interests, then initiate solutions that achieve that goal
and yet be palatable to the landlord.
As an example of the creativity required we negotiated an
early lease termination in lieu of a cash settlement when a landlord and
tenant had reached an impasse in negotiations that were based on refunds and
credits. This resolution benefited both parties. Our client, who had decided
not to renew its lease at this location, was able to plan its move at an
earlier date. The landlord, now aware of his tenant's pending move, was free
to actively market the space and, in addition, was relieved because no
refund of overpayments was required.
Lease auditing relies upon the melding of multiple
disciplines. Negotiating skill is a critical factor in this mix, one that
contributes to the lease audit firm's clients achieving what they are
entitled to: the result that satisfies their best interests.
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