Signing a commercial lease may feel like the finish line.
For the lease administration team, however, it is really the starting point.
Once both parties sign the lease, dozens of financial, operational, and reporting obligations begin. The tenant must confirm rent commencement, track critical dates, collect tenant improvement allowances, establish accounting schedules, and review landlord invoices.
Without an organized process, small issues can quickly turn into larger problems. For example, a missed deadline could cost the tenant a reimbursement. An incorrect commencement date could also affect years of rent payments.
Therefore, the first 90 days of a lease matter.
Here is what tenants should focus on during that critical period.
1. Complete a Detailed Lease Abstract
First, turn the executed lease into usable information.
A good lease abstract captures much more than the premises, rent, and expiration date. It should identify the provisions that will affect the tenant throughout the lease term.
Key provisions may include:
- Base rent and scheduled increases
- Rent commencement provisions
- Operating expense responsibilities
- Real estate tax obligations
- Expense caps
- Base years
- Percentage rent requirements
- Security deposits
- Tenant improvement allowances
- Renewal and termination options
- Notice requirements
- Insurance obligations
- Restoration requirements
- Assignment and subletting provisions
The abstract then becomes an operational roadmap for the lease.
Additionally, the lease administration team should review the lease together with every amendment, exhibit, commencement agreement, and related document.
Otherwise, the team could enter outdated or incomplete information into the lease administration system.
2. Establish Every Critical Date
Lease expiration matters, but it is rarely the only important date.
In fact, a newly executed lease may contain deadlines that occur years before expiration.
For example, a renewal option may require notice 12 months before the lease expires. A termination option could require 18 months of advance notice. Similarly, a tenant improvement allowance may expire if the tenant does not request the funds by a specific date.
Therefore, tenants should identify and track these dates immediately.
Depending on the lease, critical dates may include:
- Rent commencement
- Lease commencement
- Lease expiration
- Renewal notice windows
- Termination notice windows
- Expansion or contraction options
- Tenant improvement allowance deadlines
- Security deposit reductions
- Insurance certificate deadlines
- Reporting obligations
- Exclusivity or co-tenancy deadlines
Most importantly, tenants should not wait until a lease approaches expiration to review these provisions. By then, some valuable rights may already have expired.
3. Confirm Rent Commencement Before Paying Rent
Next, confirm one of the most important dates in the lease: the rent commencement date.
The lease may tie rent commencement to a fixed date. Alternatively, rent may begin after the landlord delivers the premises, completes certain work, or satisfies another contractual condition.
That distinction matters.
For this reason, tenants should not automatically accept the date on the landlord’s first invoice.
Instead, the lease administration team should review the lease and confirm that the required conditions have occurred before approving rent.
When appropriate, the landlord and tenant can also sign a commencement date memorandum. This document can confirm the commencement date, expiration date, and other important milestones.
An incorrect commencement date can create more than one wrong payment. It can also affect future rent increases and, in some cases, the lease expiration date.
4. Build the Rent Schedule
Once the team confirms commencement, it should create the complete payment schedule.
Of course, that schedule should include more than base rent.
Depending on the lease, recurring obligations may include:
- Base rent
- Operating expenses
- Real estate taxes
- Insurance
- Storage
- Parking
- Percentage rent
- Utilities
- Additional rent
- Other contractual charges
The team should also calculate future rent increases in advance.
As a result, Accounts Payable can compare landlord invoices against the lease before issuing payment. This process helps the tenant identify discrepancies early instead of discovering them months or years later.
5. Track Tenant Improvement Allowances
Tenant improvement allowances can represent significant dollars across a large real estate portfolio.
However, leases often include detailed requirements that tenants must satisfy before the landlord will release the funds.
For example, the landlord may require:
- Paid invoices
- Contractor lien waivers
- Certificates of occupancy
- Architect certifications
- Construction statements
- Final plans
- Written reimbursement requests
Additionally, many leases include a deadline for requesting reimbursement.
That deadline deserves close attention. Depending on the lease language, the tenant may lose access to unused funds if it misses the submission date.
Therefore, the lease administration team should create a tracking process immediately after lease execution. Waiting until construction ends can create unnecessary risk.
6. Set Up ASC 842 Accounting
For leases subject to ASC 842, the accounting process should also begin early.
The accounting and lease administration teams should evaluate items such as:
- Lease term
- Renewal options
- Fixed payments
- Rent abatements
- Tenant allowances
- Initial direct costs
- Discount rate
- Lease classification
From there, the company can calculate the lease liability and right-of-use asset and incorporate them into its financial reporting.
Additionally, setting up the accounting schedule at the beginning of the lease simplifies future monthly reporting and remeasurements.
It also improves communication between Real Estate, Lease Administration, Accounts Payable, and Accounting.
After all, Accounting should not learn about a new lease after rent payments have already started.
7. Organize the Lease Documents
Good lease administration also requires strong document control.
The lease administration team should store the complete lease package in one central location. The file should contain every document that could affect the tenant’s rights or obligations.
Those documents may include:
- Executed lease
- Amendments
- Exhibits
- Guaranties
- Commencement agreements
- Estoppels
- SNDA agreements
- Notices
- Tenant improvement documentation
- Landlord correspondence
This organization becomes especially valuable over time.
For example, several years after execution, a dispute may arise over a rent increase, operating expense reconciliation, or renewal right. A complete document history allows the team to research the issue quickly and respond with confidence.
8. Establish the Landlord Communication Process
Finally, establish a clear process for ongoing landlord communication.
The tenant should answer several questions at the beginning of the lease.
Who receives monthly invoices?
Who reviews operating expense reconciliations?
Where should the landlord send legal notices?
Who contacts the landlord when a charge appears incorrect?
Without a defined process, invoices, notices, and other correspondence can easily become scattered across individual employee inboxes.
Conversely, a centralized process creates accountability and gives the organization a reliable record of landlord communications.
Good Lease Administration Starts Before the First Invoice
Ultimately, many lease administration problems do not start with a complicated lease provision.
Instead, they start when a company fails to establish a process after signing the lease.
The first 90 days provide an opportunity to create that process.
By abstracting the lease, establishing critical dates, confirming commencement, building payment schedules, tracking reimbursements, setting up accounting, and organizing documents early, tenants can reduce risk throughout the lease term.
More importantly, proactive lease administration gives companies better visibility into one of their largest financial obligations.
At National Lease Advisors, we help multi-location companies manage their lease portfolios from execution through ongoing administration. Our services include lease abstraction, critical-date tracking, rent management, operating expense review, lease audits, and ASC 842 reporting.
Contact us to learn how we can support your team and streamline your lease administration process.
A signed lease should not disappear into a folder until the next renewal. Instead, companies should actively manage it from day one.