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NLA Identifies Lease Incompliance in New Landlord’s Operating Expense Accounting; Base Year Adjustment Saves Client $115,000

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National Lease Advisors reviews all operating expense reconciliations and budgets provided by landlords for our lease administration clients and consistently identify errors. When a building sells from one landlord to another, we often find errors due to inconsistencies in operating expense billings and ignorance of existing tenant lease protections.

In this instance, NLA noticed that after the sale of a California-based building that our client is a large tenant in, the insurance expense doubled year-over-year. From experience, we know that when this happens its because the landlord added earthquake insurance. We reviewed the lease and confirmed that when expenses are added after the base year, there must be an adjustment to the base year. After discussing with the landlord, they agreed to adjust the base year to include the cost of earthquake insurance. This resulted in saving for our client of over $35,000 per year of the remaining term, for a total savings of over $115,000!

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Posted on

February 1, 2023