The past two years have brought on many unexpected disruptions and changes and disruptions for businesses. Corporate real estate and the workplace has seen drastic impacts. As your company plans for the future and evaluates the costs associated with having office space, you should plan to conduct a 2021 lease audit in the coming months. As you prepare for the audit, diligently record all relevant information and gather pertinent records and communications. Make sure you request additional information from your landlords if you encounter any inconsistencies.
During 2021, most businesses brought their teams back to the office in fits and starts. That’s why conducting a lease audit will be particularly important for the 2021 operating year. By taking a proactive approach to lease auditing, you could gain important insight and even see significant cost reductions by recovering past overpayments and preventing future ones.
To find out if you are prepared for a lease audit, answer the following questions for all buildings where you lease space.
- Do you have complete records of your landlord’s pre-COVID-19 operating expenses?
- Do you have a comprehensive understanding of COVID-19-related operational changes and how they affect your office space?
- Can you identify which 2021 costs are nonrecurring or indicate permanent property changes?
- Can you differentiate between capital expenditures and reasonable and customary operating expenses?
- Have you looked at the specific provisions in each of your leases to determine who is responsible for various costs?
- Has your landlord communicated with you directly about changes made in the building or its operations?
- Are your landlord’s new costs, equipment and services clearly stated?
- Has the landlord extended your building’s operating hours, enhanced its services or increased staff?
- Has the landlord closed, repurposed or redesigned any spaces that feature amenities, such as dining areas, fitness or conference facilities?
- Has your landlord upgraded HVAC and air filtration or installed new equipment, like touchless doors or new restroom fixtures?
- Has your landlord enhanced sanitation services for all tenants, or are costs for those services the responsibility of each tenant?
- Are you being charged standard building services for unoccupied or partially occupied office space?
- Did your landlord reduce building services provided? If so, will you see the cost savings for those reduced services?
- Are you eligible for rent credits for any building services that you have not received?
- Was access to your building(s) restricted during any of 2021?
- Were your offices vacant for all or portions of 2021, and, if so, during what period of time?
- If employees were on site during the COVID-19 shutdown, were they restricted to certain floors or dedicated areas of your office space?
- When did your business officially re-open your space for occupancy by employees?
Looking at the Bigger Picture
- Does your lease give you the right to sublease or reduce leased space, and, if so, what are the requirements?
- How will your company offset the costs of structural workplace changes?
- For locations with a 2020 or 2021 base year, how will your landlord account for the unique circumstances during the pandemic in order to provide consistent and reasonable comparisons throughout your lease term?
- Are there benchmarks and market data to compare your real estate obligations to others in each geographic market?
Take advantage of a lease audit by finding out the answers to these questions and getting prepared now. After the rollercoaster of past two years, each business should evaluate their unique real estate portfolio to ensure the maximum benefits.