As most of you know, True Gotham is a voice for residential real estate matters but I recently had the privilege of a presentation on Commercial Lease Review and Administration by Scott Bloom, President and Managing Member of Bloom Real Estate Group LLC. For all of you out there who have commercial leases, I asked him to explain in layman’s terms what a lease review is and why a lease needs administration:
Scott: When we perform a lease review, a client provides us with a copy of the current lease and all the invoices received from the landlord during the term. We go over the lease in detail and prepare a one- or two-page description of the basic rights and obligations as a tenant. Then we compare that list to the invoices and look for ways in which they may have been overcharged.
Q: What are you looking for? Once you sign the lease, hasn’t the chance to save money pretty much passed?
Scott: In some cases, that’s true. But we are looking at things like the rent concession. When the lease was negotiated, the landlord might have granted, say, three months free rent. If those three months are all at the beginning of the term, the tenant most likely knew when they were up and expected to start paying rent. Sometimes, though, a three-month rent concession is spaced out during the term of the lease: first month now, second month a number of months or years into the lease, and the third one even further on. If the landlord’s accountant neglects to allow for those free months later on and sends the invoices straight through, the tenant might forget about them and pay the rent automatically. That’s thousands of dollars going unnoticed.
Q: How does a tenant get that money back once it’s paid without doing battle with the landlord?
Scott: If we find that a tenant has been overcharged, we have a discussion first and make a game plan. Then we will contact the landlord as an agent, and work out a refund in terms of free rent or a refund check. This way, our client can maintain a friendly relationship with the landlord while we act as a professional buffer correcting the “mistakes”.
Q: Is rent concession the only way to be overcharged?
Scott: No, we also look for things like security deposit burn-downs and rent escalations. These things can come up years after the lease have been signed, when the tenant is deeply immersed in making the business grow.
Q: It seems like a good business person should do this themselves? Wouldn’t it be smarter to go over your own lease and pocket the whole refund instead of paying you for this service?
Scott: Sure, you could do it yourself. You could do your own accounting, too, and your own taxes, but you don’t. You hire someone who has the expertise and experience to be able to do a better job than you can, and be held responsible for the results. And why should you take time and attention away from managing your business? Besides, we don’t charge our clients for lease review and administration. It’s all part of making the deal. We don’t collect the commission and disappear. We are in it for the long run. We want you to let us handle your next move, or your expansion, or your additional offices. We want to act as your outsourced real estate department.
So it seems like a no brain-er to have a lease review to determine whether or not you are being over charged. If you’re interested, you can visit Bloom Real Estate Group’s website and learn more about this service. And by the way, Scott and his team saved my daughter’s nursery school $750,000 when negotiating a lease.