Amount Saved: $425,000
Recovery Type: CAM/Operating Expenses; Onboarding
Client Use: Retail
Overview:
During the onboarding process of a new retail client, our team at NLA identified a significant discrepancy in the way operating expenses were being charged. The landlord was incorrectly applying the terms of a NNN (Triple Net) lease to what was actually a Base Year lease. This misapplication resulted in substantial overcharges to our client.
Challenge:
The lease stipulated a Base Year expense structure, where the landlord is responsible for operating expenses up to a certain base year amount, and the tenant only pays increases over that base year amount. However, the landlord had been billing our client as if they were responsible for all operating expenses, which is the case in a NNN lease. This error had gone unnoticed since the lease commencement.
Solution:
Upon reviewing the lease documents during the onboarding process, NLA’s expert team identified the error. We immediately took action to rectify the situation:
- Detailed Lease Review: Conducted a thorough review of the lease agreement and historical billing statements to confirm the discrepancy.
- Negotiation with Landlord: Engaged with the landlord to address the incorrect billing and provided evidence supporting the correct Base Year lease terms.
- Correction of Charges: Successfully negotiated the correction of charges, resulting in an immediate refund of $85,000 for the initial overcharges.
- Future Savings: Ensured the correct billing method moving forward, securing $85,000 in annual savings for the remaining four years of the lease term, totaling $340,000.
Results:
- Immediate Savings: $85,000 refunded for past overcharges.
- Ongoing Annual Savings: $85,000 annually for the next four years, totaling $340,000.
- Total Savings: $425,000 over the lease term.
This case underscores the importance of meticulous lease administration and the value of professional oversight. By identifying and correcting the billing error, NLA not only recovered significant immediate savings for our client but also ensured substantial ongoing savings. This proactive approach demonstrates our commitment to protecting our clients’ interests and optimizing their lease agreements.