A large lease administration client of National Lease Advisors (NLA) received a reconciliation with a substantial amount due. NLA reviews all operating expense statements received by clients to ensure the expenses comply with the lease and are industry standard.
The Challenge
The building where our client’s office is located had a high rate of vacant space and had just lost another significant tenant. Upon examining the reconciliation invoice, we discovered that the landlord had incorrectly calculated the operating expenses, thereby inflating the amount our client owed.
Specifically, the landlord had fully ‘grossed-up’ certain operational costs such as security, janitorial services, and utilities. The landlord failed to acknowledge that there would still be a fixed component to these costs that exists irrespective of the building’s occupancy levels. According to standard industry and lease norms, these expenses should only be partially grossed-up based on actual occupancy rates.
Resolution
We initiated a dialogue with the landlord to clarify our observations and to correct the improper gross-up calculations. After a series of respectful yet assertive communications, the landlord agreed to adjust the reconciliation based on the correct method for grossing up expenses.
Outcome
Thanks to this adjustment, our client realized a substantial saving of $150,000 in their reconciliation invoice. This case illustrates the value of NLA’s proactive and expert lease administration services, ensuring that lease terms are not just legally compliant, but also financially optimized for our clients.