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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