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There might just be a treasure chest of cash and cost-cutting opportunities hidden in the year-end reconciliation statement from your landlord,butyouwon’tfinditunlessyou’rewillingtorollupyoursleevesanddig.Manytenantspaythesereconciliationchargeswithoutthinkingtwice.Butthesavvytenantthoroughlyexaminesthestatement,seeingitasanopportunitytoimprovehisbottomline.
Commercialrealestateleasesoftenhaveprovisionsallowinglandlordstoseekreimbursementsfromtenantsfortheirproratedshareofoperatingcosts.Thesechargesarebetterknownascommonareamaintenancecharges,baseyearreimbursements,orcapitalexpenditureamortizationreimbursements.
Asatenant,youprobablymakeestimatedpaymentsduringtheyearandattheendoftheyearreconcilethedifferencebetweenwhatyou’vealreadypaidandtheamountyouactuallyowe.
But,beforeyouwriteacheck,reviewthechargescarefully.Youmightcomeacrossafewsurprisessimilartothisone:
Whilereviewingreimbursementchargesforanewclient,wediscoveredthathepaidtwoseparatemanagementfeestothelandlordforhissmallproperty.Thecreditextendedbythelandlordforthissinglemistakecutourclient’sreimbursementcostsby25%lastyear-asignificantcostreduction.Butwhatreallycameasasurprisewaswhen,uponfurtherinvestigation,weinformedhimthathisbottomlinehadsufferedfromthatsameduplicationerroreveryyearforthepastnineyears.
Acarefulreviewofyourstatementscanoftenreduceyourreimbursementobligations,andinsomecasesitmightputyouinsteadofyourlandlordonthereceivingendofreconciliationpayments.
Allreimbursementsyou’rebilledforshouldbeauthorizedinyourleaseagreement.Authorizedreimbursementstypicallyincludesharedexpenseslikelandscaping,maintenance,parkinglotelectricity,andminorrepairs.Somelandlordsmightseekreimbursementsforunauthorizedexpenseswhichyou’renotobligatedtopay,likedirectownershipcosts,leasingcommissions,improvementstospecificspaces,andotherexpensesnotrelatedtocommonareas.
Evenifyouonlyfindauthorizedchargesonyourstatement,youshouldstillmakesurethatyou’renotbeingaskedtocoverunreasonableexpenses.Forexample,eighthoursofsnowremovalisanauthorizedreimbursement,butit’sunreasonableforyoutopayitifthelandlorddidn’thavechecksandbalancesinplacetoensurethateighthourswereactuallyspentplowingsnow.Landscapingexpensesarealsoauthorized,buttheytoocanbeunreasonable.Youshouldn’thavetoshelloutthemoneytopaythelandlord’sson$50perhourtomowthegrass,norshouldyouhavetoreimbursepropertyownersthatchosetoreplaceasmalldeadtreewithatreetentimestheheightandcost.Inadditiontoathoroughexaminationofhisreconciliationstatement,thesavvytenantavoidsunreasonablechargesbypayingcloseattentionduringtheyear,totheworkbeingdonearoundhim.
Withaqualifiedaudittoensurecarefuldocumentationofyourleaseandannualreviewsofyourreconciliationstatements,you’llavoidthese“budgetbusters,”unauthorizedreimbursementscharges,andunreasonableexpenses.Thiswillresultinasignificantreductioninyouroccupancycostswhichwillhaveaverypositiveimpactonyourbottomline!
NewsletterVolume01
Landlords Year-end Reconciliation Statements
October07IssueV.01
A Source of Hidden Cash?
TenantRealEstateAdvisors tenrea.com
Need time to focus on your own business rather than dealing with your company’s real estate headaches? TenantRealEstateAdvisors(“TREA”)isanoutsourced,full-servicerealestatedepartmentthatservesasanadvocateforcommercialtenantsnationwide.Ourcreativesolutionshavebeenproventosavetimeandmoneysothatyoucanremainfocusedonyourbusiness.TREAwillbeasinglepointofcontacttostreamlineyourrealestateprojectsandincreaseproductivity.
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Volume0102 TenantRealEstateAdvisors
TREA WiLL bE YouR AdvoCATE iN LEASE NEgoTiATioNS (boTH NEW ANd RENEWAL)
Landlordshavebrokerslookingoutfortheirbestinterestduringnegotiations.Theselistingbrokersexisttosellrentalspace,nottohelpyou(thetenant)makeawell-informeddecision.Youneedsomeoneonyoursidetolevelouttheplayingfield.because TREA only represents tenants,youcanrestassuredthatwe’llactasyourfiduciaryandlookoutforyourbestinterestbyprovidingonlythemostaggressive,uncompromised,andconflict-freerepresentation.
MoST oF ouR SERviCES ARE pRovidEd AT No AddiTioNAL CoST To You.
Alllandlordsbudgetforacommissiontobepaidineveryrealestatetransaction.Whenyousignanewleaseorarenewalwithoutrepresentation,thatcommissionispaidtothelandlordorlistingagent.WhenTREArepresentsyou,we’llparticipateinthatleasingcommissionandreceivecompensationfromyourlandlordatthecloseofeachtransaction.
gARY L. CHRiSTENSEN, SIOR,CCIM,CPMPRINCIPAL
GaryfoundedTREAtoprovidesmalltomidcapcompanieswiththeadvantagesofaprofessionalrealestatedepartment.His25yearsofexperienceinrealestatemanagementandnegotiatingthousandsofleases,allowshimtodrawonthisknowledgeandskilltogetthebestresultsforhisclients.
Street: 4445NorthparkDrive,Suite208, ColoradoSprings,CO80907
Office: 866.799.8732or719.634.9000 Fax: 719.448.0500
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